As the UK economy emerges from the financial shake-up that shaped the past few years, the mortgage market is moving back to growth. This is echoed in the Council of Mortgage Lenders figures indicated, predicting that volumes will rise further during 2014, potentially reaching £200 billion. This positivity in the market provides a good opportunity for both new entrants and established lenders.
Since the financial crash, the mainstream market has in some people’s opinion been seen as over cautious with its lending, viewing many borrowers as too high in risk to lend to. New entrants need to be successful in order for the industry to continue to grow healthily as they will increase competition with the existing larger players and also better the customer experience. Therefore, new entrants must develop different distribution strategies to build market share.
Take advantage
It is common belief amongst new entrants that the financial crisis has driven a lack of consumer confidence in the main-stream mortgage providers, resulting in an underserviced group of potential customers. As such, an opportunity has been created for new market players to win over public trust and offer themselves a viable alternative to the traditional lenders. A key differentiator promoted by new entrants is their ability and willingness to take on more risk in their lending than the bigger players, whilst of course still complying with all relevant regulations of the Financial Conduct Authority.
Demand for mortgages is once again growing as the mortgage market finally recovers and public confidence slowly but surely returns. If new entrants get their offering right, this could be a perfect opportunity to enter and thrive in the market. The Mortgage Market Review (MMR) also brings extra stability to the industry, however, implementing the right processes to be MMR compliant in a cost and time effective way can be a challenge for not only new entrants, but also established lenders.
Focusing on what’s important
Lenders – both big and small – can outsource to a third party who are experienced in dealing with these challenges. They can then get to market quickly, whilst their proposition is still relevant. In the fast-paced market, time is of the essence and in turn can be a huge risk factor. Offerings can be out of date within a matter of months. When policies and processes are streamlined, only then can lenders focus on the core products they are looking to promote. Unburdening them of the operational and back office functions allows them to focus on the funding and product distribution, reaching as many new customers as possible.
It is an exciting time for the UK mortgage market, and one that presents as many opportunities as it does challenges. For those willing to adopt the appropriate processes and systems, there is no reason why 2014 can’t be a successful year for them. We hope that these new entrants can further shake up the natural order of things and restore some real competition to the market. All in all, the more choice and variety there is in terms of products, and pricing, the more the customer stands to benefit.
