Donna Wells

director, Envelop

It’s been an interesting few weeks for the UK economy and the mortgage market. This is a period that has pushed lending boundaries and really demonstrated the value of advice for all borrowers, and the importance of packaging partners for brokers when it comes to securing a range of specialist solutions in such a turbulent lending environment.

In last month’s piece – which seems like an eternity ago, considering all the changes that have taken place across the market – I looked at the momentum being generated in these specialist markets. The past few weeks have further exemplified this trend, and with growing uncertainty surrounding the state of the economy, compounded by the cost-of-living crisis and multiple base rate hikes, an overwhelming 94 per cent of mortgage intermediaries have indicated that they expect the specialist mortgage market to grow further over the next two years.

This was highlighted in findings from UTB as part of extensive research for its new mortgage white paper, “Growing opportunities for brokers in the specialist mortgage market.” Within this, 57 per cent of respondents predicted significant growth of up to 20 per cent, whilst a further 17 per cent expect the market to expand even further.

The report revealed the specialist niches brokers believe offer the most growth potential in the near future. The top five are:  borrowing into retirement – 61 per cent  self-employed applicants – 52 per cent  multiple income applicants – 49 per cent  second charges – 43 per cent  adverse credit applicants – 38 per cent

The report also found that specialist cases were an excellent source of new business, with brokers indicating that 73 per cent of the specialist mortgage applications they deal with come from new clients. Furthermore, successfully helping a customer with more challenging requirements can lead to greater loyalty. Ninety-two per cent of brokers said that specialist mortgage customers are more likely to approach them again, having appreciated the value they added to the process and the outcome. There was also a higher chance of customers referring friends and family.

With a greater number of borrowers, both potential and existing, likely to slip into the more specialist lending bands, these results are hardly surprising. However, they do highlight the opportunities on offer for intermediaries throughout the specialist lending markets, especially for those who are working with a trusted packaging partner.

Bridging Finance Solutions (BFS) recently reported a sharp rise in the number of clients securing bridging loans in order to support their children through the purchase of property. BFS suggests that young aspirational homeowners, keen to take their first steps onto the property ladder, are faced with unaffordable house prices coupled with rising interest rates and reluctant lenders. BFS argues that increasing the size of the deposit will inevitably improve the rate, whilst parental support will provide the opportunity for children to take that major leap into the property market, and this represents an interesting area to follow.

As the lending landscape continues to change, it’s evident that all borrowers need access to a wider, more considered range of solutions to meet their present and future needs. Again, this is a trend that only serves to highlight further the importance and value of the advice process.

Rising costs are not only affecting individual borrowers but – just as many were getting back on their feet following the pandemic – they are also severely affecting businesses across the UK.

As a result, more than 40,000 SMEs are likely to lean on finance providers to help support their businesses. This is according to a study from fintech lender Nucleus Commercial Finance (NCF) which found that 15 per cent of small and medium-sized UK businesses expect to need a loan to support the running of their business. While just one per cent of sole traders expect to have to go down this route, this number rose to 16 per cent among smaller businesses employing between 50 and 249 staff.

Two-thirds (66 per cent) of UK SMEs are worried about the prospect of rising business costs over the next 12 months – and among small and medium-sized businesses, this figure rises to 74 per cent, with 29 per cent of this group stating that they are “very worried” about costs going up over the next year. However, just 38 per cent of businesses say they are confident about being able to access affordable finance in the next 12 months should they need it.

It will take a collaborative approach to help a raft of businesses overcome the many challenges facing them, and I make no apologies for reiterating again just how important a role the intermediary community will play in sourcing the right solutions to help them overcome these financial obstacles.