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Sub-prime predicted to be biggest growth area

Mortgage intermediaries expect sub-prime lending to be the biggest growth area this quarter, according to research by BM Solutions.

Although mainstream mortgages accounted for 55 per cent of all business introduced in the last three months of 2002, intermediaries believe sub-prime will take the lead.

Predictions for the growth of sub-prime business in the next quarter average 4.9 per cent compared with 4.3 per cent for self-certification, 2.4 per cent for mainstream and 2.1 per cent for buy to let.

The quarterly survey of 200 intermediaries, carried out in December, found that self-cert made up 22 per cent of lending in the last quarter while 12 per cent was buy to let and 10 per cent was sub-prime.

Average loans for self-cert and mainstream mortgages were £122,400 and £119,800 respectively. The average loan size for buy to let was £90,200 and £98,700 for sub-prime.

BM Solutions says most intermediaries are preparing for mortgage regulation and the potential increase in business volumes and paperwork.

The proportion of intermediaries who believe regulation will have no effect on their business has fallen to 21 per cent from 30 per cent in the previous quarter.

Those who expect to see an increase in business as a result of reduced competition or the elimination of bad advisers have increased to 28 per cent from 24 per cent.

Director of mortgages Michael Bolton says: “The results show that intermediaries continue to be bullish about specialist lending growth, especially in sub-prime and self-cert.”

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