Recently, there has been a very noticeable increase in the number of banks and building societies facing closure and loss of business, resulting in dynamic thinking and innovation have become less of an option and much more a necessity. In modern times, both residential and business borrowers have started to expect a lot more from their lenders, owing in part to an influx of more streamlined finance providers who are willing to go the extra distance by offering flexible products with competitive borrowing rates.
With this in mind, many experts are predicting a large number of changes will be implemented in the building society sector over the coming months, which will enable several main players to regain their competitive edge whilst still complying with the financial regulations that offer their customers safety and protection. These changes will see the introduction of a number of new products which many of us do not traditionally associate with mainstream lenders.
In the last week or so, two more building societies have announced their plans to join the bridging sector. Both the Saffron Building Society and the Buckinghamshire are about to just the bridging loan market for the very first time, with the Saffron actively considering the provision of unregulated bridging loan products for those in the property development sector.
A surprising move by one of the most recognized players in the industry, namely the Yorkshire Building Society, is the announcement that they will start to offer interest-only lending solutions as the only borrowing option on some of their products. This is part of a dramatic shake-up that will see many more changes being implemented and rolled out throughout the course of the next year or so.
“I’ve had discussions over the last couple of years with a few, who think there is an opportunity for interest-only as the Mortgage Market Review settles down and lenders work out where demand is,” commented Paul Broadhead, Building Societies Association head of mortgage policy, adding further,
“We’ve also seen some of the smaller ones look at lifetime mortgages, and I suspect we’ll see more of that.”
The reason that these somewhat unconventional changes are being introduced seems to be two-fold. Firstly, there has been an aggressive surge of alternative lenders providing fresh competition in a previously stagnating marketplace. Secondly, there are those who point the finger at an increase in a plethora of newly introduced lending regulations which are making it more and more difficult for mainstream players to compete with their unregulated counterparts.
“I think the reason that some of these building societies are prepared to look at some of these higher-risk areas is because they have been driven there by the regulator,” suggested John Charcol, senior technical manager Ray Boulger.
“Although the Bank of England has said it will amend the capital adequacy requirements for smaller lenders, the reason most building societies, and all the smaller ones, can’t compete in the low-LTV market is that the capital they have to hold against low-risk loans is significantly higher than the capital that has to be held by the larger lenders, and they simply can’t compete.”
Renowned for its commitment to customer service and ability to deliver high quality products, it now seems that the building society sector has no option other than to innovate and move forward into new territories if it is to stay competitive and thrive in an ever changing market. – https://www.bridgingloans.co.uk