Tight lending criteria could ease as banks seek to boost income

A national mortgage brokers is predicting that first time buyers may find it easier to get on the housing ladder as banks seek to boost income from the mortgage market.

Shaun Evans, CEO of Mortgage Experience, said:

“Since banks have had to ringfence their retail banking activity from their riskier investment banking arms, they need to find ways to boost income within their ring-fenced arm. This has led to banks competing to gain more market share of the mortgage sector.”

According to Shaun, this is great news for borrowers because it means firstly low rates, not just because of the Bank of England interest rates, but also because the banks are competing for lenders business. However, he also predicts that banks will also start easing their lending criteria to win new business, asking for lower deposits and offering better rates on higher loan to value brackets.

Shaun said:

“What we are already seeing is banks reducing the rates they are offering on higher loan to value mortgages, which typically have higher rates because they are seen as riskier. This is great news for buyers at any stage but should have a positive impact on the first-time buyer market in particular, because a first-time buyer will be able to have less deposit and get a better deal.”

However, Shaun does believe that, while banks aren’t taking risky investments yet, it could be a trend that the industry needs to be careful of.

He said:

“All we are really seeing at the moment is the banks making less money on their riskier mortgage business. However, if we can learn anything from the last crash, it’s to keep a careful eye on risky lending. As banks seek to continue to boost their income and gain greater market share of the mortgage market, we could see more riskier lending and customers being taken on who previously wouldn’t have been given a mortgage.”

As it stands now, Mortgage Experience see the current competition in the banking market as a positive thing.

Shaun added:

“Banks have been extremely strict in their lending criteria and if you’re deemed a riskier candidate for a mortgage, it can prove difficult to find a good deal. The current competition is a good thing for the market, which might help inject more life into house sales and it means, for homeowners and home buyers, there probably hasn’t been a better time to get a mortgage or remortgage.”

Mortgage Experience’s head office is based in Lancashire but has brokers nationwide. The firm has been nominated as “Best New Entrant (Broker)” in the 2019 Mortgage Introducer Awards and the Best Specialist Mortgage Broker of the year at the British Bank Awards.

The company is one of the UK’s fastest growing financial services businesses, providing mortgage advice for home buyers and specialising in finding good mortgage deals for people who may have struggled to get a good deal from the bank, because of factors such as being self-employed or a first-time buyer.