Specialist mortgage lending set to triple by 2030 ‘half a million locked out of market’

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The new study by Together predicts that specialist residential mortgage lending will rise from £5bn to £16bn by 2030, while the market as a whole will expand by 56 percent to £400billion in the next eight years. The rise comes as traditional working and living patterns continue to shift and homeowners increasingly grapple with rising living costs, leaving more people dependent on specialist owners.

Specialist lending is a segment of the mortgage market that provides alternative property loan solutions to borrowers who are unable to meet the lending criteria set by high street lenders.

The new study, carried out by Together in partnership with economist Dr John Glen, predicts as many as 500,000 mortgage applications will be refused a mortgage without specialist lending, doubling the market share to four percent of the overall mortgage market by 2030.

Dr Glen from Cranfield School of Management 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.”

Two key factors underpin this forecasted growth, according to Dr Glen.

Firstly, 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, the growing trend towards flexible working, and the emergence of the non-nuclear family, will continue to alter housing needs.

The second key factor underpinning the growth is the shorter-term risk appetite of mainstream lenders.

Lending criteria will tighten, and at the same time, potential homeowners grapple with the current cost of living crisis. The impact of rising inflation will also puncture potential borrowers’ ability to access consumer credit, according to Dr Glen.

The study of over 7,000 consumers showed that in 2021 just seven percent of applicants had taken out a mortgage with a specialist lender.

In the latest study, 53 percent of the adult population who took part now fall into one or more criteria categories classed as ‘non-standard’.

When looking at those who have applied for mortgages, this figure jumped to 62 percent, suggesting there is a large existing demand for an even more flexible lending landscape.

Having a 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 percent).

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Having thin or impaired credit or being over 55 or divorced and considered a non-standard profile (both 21 percent) also worked against applicants, as did being in a non-standard buying situation (26 percent), like shared ownership, or wanting to buy a non-standard property (12 percent).

Gerald Grimes, Group CEO Designate at Together: “Our research into the residential mortgage market highlights the growing need for specialist lenders and the problems faced by borrowers who are categorised as ‘non-standard’ in realising their ambitions to own their own homes.

“The UK’s mainstream mortgage system just isn’t adapting fast enough to how we live.

“Every year, an increasingly large group of potential homeowners must navigate a needlessly complex, intrusive, and time-consuming mortgage journey, with many facing outright rejection at the end of it.

“If our aim is to support ambition and make homeownership more inclusive and achievable, it’s time the industry, supported by the Government, rethinks how borrowers can access finance to realise their dreams of homeownership.”

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