Home Property Finance & InvestmentMortgages Specialist residential mortgage lending is set to rise from £5bn to £16bn by 2030

Specialist residential mortgage lending is set to rise from £5bn to £16bn by 2030

by LLP Finance Reporter
16th Aug 22 5:53 pm

The study, carried out in partnership with economist Dr John Glen, also predicts the overall UK residential mortgage market will expand by 56% over the next eight years and, that of this rise, as many as 500,000 mortgage applications will be dependent on specialist lenders – doubling their market share to 4% of the overall UK mortgage market.

Two key factors underpin the forecast growth in the specialist residential mortgage market, according to Dr Glen. Firstly, many more potential homeowners are expected to fall outside of traditional mortgage selection criteria in coming years as structural changes, such as the rise of the gig economy and the growing trend towards flexible working and the emergence of the non-nuclear family, alter our housing needs.

Second, the shorter-term risk appetite of mainstream lenders will be a key factor, as they continue to tighten lending criteria at the same time as potential homeowners grapple with the current cost of living crisis. The impact of rising inflation will also dent potential borrowers’ ability to access consumer credit.

The study of over 7,000 consumers, conducted for Together by Opinium, shows that in 2021 just 7% of applicants had taken out a mortgage with a specialist lender. In the UK, 53% of the adult population who took part in the latest study fall into one or more criteria category classed as ‘non-standard’. However, when looking just at those who have applied for mortgages, this rises to 62%, suggesting there is a large existing demand for an even more flexible lending landscape.

Having non-standard income, including multiple and complex incomes or being self-employed, was cited as a key reason for being rejected for a mortgage (22% of respondents). Having thin or impaired credit or being over 55 or divorced and considered a non-standard profile (both 21%) also worked against applicants, as did being in a non-standard buying situation (26%), like shared ownership, or wanting to buy a non-standard property (12%).

19% of potential homeowners were rejected from the mortgage process in the last five years, according to the results of Together’s survey.

If the forecast growth in the specialist residential mortgage market does take place, there could be a halo effect in terms of expanding homeownership. Dr Glen anticipates a fifth of new specialist mortgages (approx 100,000 applications) would come from borrowers who have not previously had a mortgage. Together’s study backs this up, with 13% of respondents who have never made a mortgage application saying this was because they expect to be rejected or be deemed ineligible from the get-go.

Dr John Glen said, “At a time when the Government is seeking to extend homeownership, this study shows that as many as half a million future applicants could be locked out of the mortgage market without the support of specialist lenders. This highlights systemic issues with the mainstream mortgage process which currently bars many potential buyers who have non-standard criteria.”

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