The lending market has polarised. Large high street lenders offer a strictly enforced computer-generated underwriting business model. Whereas the smaller lenders, particularly among the mutual building societies, have taken the view that credit scoring is not a satisfactory methodology.
Niche lenders and mutuals have recognised that human intervention in the underwriting process provides more flexibility. Therefore these lenders have been able to help customers who have effectively been ostracised by the high street. Clients hit by the ‘computer says no’ mentality might have had a historic problem by way of minor or one-off credit problems. Or they may be part of the ‘pariah’ groups such as older borrowers. Or those who are on interest-only and find their future blocked by a high street that has withdrawn interest only as an option. Of course, habitual non-payers will find the door firmly closed no matter where they go.
The vacuum created by banks ‘streamlining’ their offering has seen the growth of specialist lenders like Precise Mortgages, Kent Reliance, Magellan, and GE Money, as well as the mutual sector.
The market for specialist products and criteria is massive. Advisers have a clear opportunity to offer a bespoke service to clients who do not fit into the neat boxes the high street lenders wish to focus on.