As the UK continues to grapple with the cost of living crisis and people’s finances continue to become increasingly more complex, it has never been more important for brokers to get to grips with the workings of the specialist lending market.
The past few years have hit the finances of UK consumers hard, with the Covid pandemic, soaring inflation and rising interest rates placing increased pressure on household budgets.
This has led to more borrowers starting to fall foul of the mainstream criteria of the high street lenders and needing the services of the specialist lending market.
This trend is likely to continue to fuel further growth in the sector, which has experienced a significant uptick in business over the last few years, driven by multiple market forces and the reluctance of mainstream lenders to take on heightened risk.
According to data from the Bank of England released in June this year, specialist lenders increased business volumes by 328% between 2009 and 2021, from under £5bn to more than £21bn.
Between 2020 and 2021 alone, specialist lending increased by 32%, the equivalent of £5bn, with both regulated bridging loans and second charge mortgages seeing a significant increase in growth.
This rise in demand for specialist lending products has been driven by a number of factors. Increased chain breaks and delays to the mortgage and house purchase process has helped to fuel growth in the regulated bridging sector; while the growing trend among many consumers to improve rather than move homes has seen demand for second charge mortgages grow as borrowers start to acknowledge the benefits of retaining the preferential rate on their first charge mortgage.
With the boom in specialist lending set to stay, brokers unfamiliar with the market may be concerned and uncomfortable about advising on specialist lending products. Similarly, some networks may not allow their brokers to advise on specialist areas of the market such as regulated bridging.
This is where specialist distributors play a role, as brokers can refer their clients to businesses such as Norton Broker Services knowing they will get the advice they need, while keeping the client on their books.
The fact is that specialist distributors have been advising on regulated bridging since its introduction as a product and second charge mortgages since the inception of the MCD and have a vast amount of knowledge on the sector. Using a referral service provides brokers with a route of getting a deal done, rather than losing out because they are unfamiliar with the sector.
This means they can be assured their clients receive tailored specialist advice and a suitable product, while they concentrate on the bread and butter such as standard mortgages. There is also the added bonus that brokers will still get remunerated for the referral, as they initially introduced the client.
With further base rate rises expected and inflation predicted to hit 18% early next year, the reality is that many more people are likely to experience a blip in their finances in 2023.
This means demand for specialist lending products will be greater than ever, and for those brokers unfamiliar with how the sector works, utilising the services of a specialist distributor will ensure they still meet the changing needs of their clients.
Sonny Gosai is senior sales development manager at Norton Broker Services
