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Sub-prime numbers still add up

Tara Powley reports on research which shows that brokers are wary of some lenders but still have faith in the sub-prime mortgage market

Nearly a quarter of mortgage brokers say their business has been hit by the turmoil in the international markets over the US sub-prime crisis and 71 per cent say they will now be more wary of dealing with some lenders.

The survey of 100 mortgage brokers and packagers by GE Money Home Lending reveals that 63 per cent of brokers still have faith in the sub-prime market but one in seven believes they will change the way they operate.

Of the 71 per cent who say they will be more discerning about which lenders they do business with, 60 per cent say they are less likely to deal with lenders that withdraw deals at short notice and 40 per cent are less likely to deal with newer players.

Twenty per cent are more likely to deal with stable, established lenders and 0 per cent say they are more likely to treat lenders that securitise with greater caution.

The fallout from the US sub-prime mortgage turmoil claimed its first UK mortgage lender victim recently. Victoria Mortgages – which withdrew its products from the market at the beginning of August but claimed it would relaunch its products just weeks after – has become the first UK mortgage lender to enter administration since the market turmoil began.

Victoria – which had just a 0.064 per cent share of the UK mortgage lending market – was one of several non-conforming lenders that temporarily withdrew from the market.

London & Country mortgage specialist James Cotton says: “It is difficult for brokers in the current climate especially when lenders withdraw a deal and say that’s it. But the fact that 63 per cent say they have faith in the sub-prime market is fairly comforting. The sub-prime market will keep going. There will still be people who have credit problems looking to buy houses.”

The research highlights that brokers feel it is the lender’s role to have robust tools and systems to ensure they continue to lend responsibly and communicate this clearly.

The Association of Mortgage Intermediaries recently said it would not be putting pressure on lenders to introduce a minimum notice period for product withdrawals despite some lenders giving brokers only a few hours’ notice of repricing.

Director general Chris Cummings says the AMI does not want to see further regulation and he understands that lenders have to be quick to respond.

Premier Mortgage Services managing director John Malone says: “Each lender is doing what they believe is right in their marketplace. Lenders must be allowed to run their business how they want to run it. People have to be reasonable because it is an unreasonable time.”

Brentchase Financial Services mortgage specialist Mike Fitzgerald says he would like to see a longer notice period for product withdrawals but the market is so stretched that he cannot see how any lender could guarantee sticking to a minimum time period.

“With all that is happening at the moment, you just cannot put a limit on it,” says Fitzgerald.

Personal Touch Financial Services sales director Dev Malle says: “We work in a marketplace where prime lenders have been doing this for years. I think it is unfair in the current market to point the finger. It is a difficult market and we have to bear with them.”

GE Money’s research also shows that the vast majority of brokers believe the constant debate about instability is generally having a negative effect on customers, with 68 per cent claiming that consumers are worried about the impact.

Over half of the brokers surveyed believe lenders should declare their long-term commitment to the sector, ensuring they are consistent and reliable with the deals they are offering.

Some brokers express concern about borrowers being left in the dark by lenders withdrawing ranges at very short notice or those that are unclear about how they intend to deal with pipeline cases.

GE Money Home Lending chief executive officer Colin Shave says: “Our research shows that many brokers are clearly nervous about the potential impact that recent events are having on some lenders and this is creating uncertainty.

“It is crucial that experienced providers with solid financial strength and pedigree reassure their partners of their long-term commitment to the non-conforming market while ensuring that any changes to products, criteria or pricing are communicated in a well-timed decisive and transparent fashion.”

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