Time to end negative connotations around 'non-standard' lending

Within this period we’ve also seen attitudes to homeownership grow and volumes hit record levels to really propel the housing market into a new pricing stratosphere. A stratosphere which could impact the growing number of potential and existing homeowners who have fallen beyond mainstream lending boundaries and are now deemed to ‘only’ fit non-standard lending criteria.

Non-standard is a subjective term at the best of times but this does point to the importance of the specialist lending market and, if recent data from Together and economist Dr John Glen is anything to go by, this is an area which is only destined to rise further in prominence.

The study outlined that specialist residential mortgage lending is set to grow from £5bn to £16bn by 2030, driven by long term shifts in working and living patterns. The study also predicted that 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.

According to Dr Glen, two key factors underpin this projected forecast. 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. Secondly, 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.

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 (approximately 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.

Again, the word specialist can also be somewhat misconstrued at times. Historically, this is an area which has largely been shunned by mainstream lenders and this may have led to a negative perception and even certain labels when it comes to the types of borrowers or the lenders active in this space. Some of these perceptions may have been justified in the past but we, as an industry, have made massive strides forward in terms of professionalism and in maintaining responsible lending boundaries.

No longer should there be any undesirable connotations attached to the words non-standard or specialist when it comes to the mortgage market. And the intermediary community is vital in conveying this message to those credit-worthy clients who may have slipped into this classification but who still need access to viable solutions to achieve their homeownership aspirations.