As a lending community, it’s part and parcel of our future planning to be fixated on data and in analysing an array of different trends. This is especially apparent for building societies as we have to be acutely aware of where every pound is being lent and to carefully manage how it is spread across our lending book.
By this I mean the volumes and types of business written from a product, pricing and term perspective – amongst other factors – as we are governed by some very strict lending rules. In addition, and this is not to say that other lenders don’t do the same, but we take our lending responsibilities extremely seriously due to the simple fact that we are dealing with our members’ money. Meaning we are constantly balancing our exposure to risk and how our lending portfolio is constructed at any given time.
This isn’t easy but that doesn’t mean societies can’t be at the forefront of product innovation or maintain a major presence in the more specialist markets. After all, it’s in some of the more niche lending areas where many of the smaller building societies have really made their names in recent times.
Having said that, the definition of a ‘specialist’ offering is an increasingly tricky one in a lending environment where boundaries have become even more blurred between what is traditionally classed as being mainstream and what is traditional classed as being specialist. This is especially apparent across the residential market – from first-time buyers looking for alternative options amidst ongoing affordability concerns through to those in later life who are realising that a one-size-fits-all retirement plan no longer exists.
Harking back to our fixation with data and trends, it was interesting to see recent data from Ignite, Legal & General’s mortgage research and sourcing platform, indicate that September saw a notable 51% jump in searches for interest-only mortgage products – with both first-time buyers and existing homeowners said to be significantly engaged. To further reflect ongoing economic challenges and long-term market affordability issues, searches representing borrowers interested in shared ownership were also reported to have increased by nearly a third (32%).
Much has been said and written about interest-only mortgages over the years but with more stringent regulatory measures now in place to govern this practice, this is proving to be a valid and responsible solution for the right borrowers who have an acceptable and robust repayment strategy firmly in place.
Focusing briefly on shared ownership, this remains a solution which may provide the only realistic means of buying for some would-be homeowners – especially in the current economic climate. It’s also one which plays to the strength of smaller, innovative, flexible lenders who possess a strong regional knowledge.
It’s fair to say that both these product types play a different but equally important role within our overall proposition but, by their very nature, they will certainly not fit the bill for every borrower and in that respect, I think they should probably remain under the more specialist banner, for now at least. Being under this kind of banner also further emphasises the need for anyone contemplating such a product to seek good, professional mortgage advice. And the rising demand for more specialised products for residential purposes clearly demonstrates how, and why, the value and influence of the intermediary market is only going to continue rising.
David Lownds, Head of Products and Marketing at Hanley Economic Building Society