Societal change sees specialist lenders surge

The specialist lending market also supports people purchasing shared ownership and right-to-buy properties, and in many other situations where, due to having what is classed as a “non-standard” profile, potential homeowners are being underserved by mainstream lenders, Together said.

It added that the changing nature of society, work, and family relationships has made the needs of today’s mortgage borrowers more diverse than in the past. Its research showed that the three strongest drivers of growth in specialist lending are shared ownership, which is expected to grow from £2.3bn currently to £5.2bn; lending to customers that are retired, increasing from £600 million to £1.4bn; and the demand for mortgages on self-build properties, increasing from £57m to £116m.Inflationary cost challenges and the fall-out from the cost-of-living crisis, are also predicted to continue to harm potential borrowers’ ability to access credit, fuelling an increasing need for support from specialist lenders, explained Together.

The whole-of-residential market analysis by economist Rob Thomas, principal researcher at the Intermediary Mortgage Lenders Association, carried out in partnership with Together, estimated that more than one sixth of regulated mortgage lending in 2023 fell into one or more specialist categories.

However, Together said that access to mortgage financing remains a challenge for those considered “specialist” or “non-standard”. It explained that many may find they are rejected outright by mainstream lenders using a highly automated approach when assessing mortgage applications and tighter underwriting criteria. In the last five years, 7 per cent of non-standard applicants were rejected, with 4 per cent also denied financing in the last 12 months.

Steven Clark, corporate relationship director at Together, said: “Our research highlights the true challenges faced by home buyers in the residential property market today, in Scotland and across the UK.

“Considering the turbulence of the last couple of years, many people may have had historic credit issues caused by minor events, such as missed bills, but which have since been addressed.“Scotland’s borrowers need lenders that are willing to take time to build a relationship with them, understand their situations and use common sense to make lending decisions.

“Additionally, in Scotland, we are also seeing many customers coming to us with unusual property types. People often find themselves unable to access finance as high-street banks are reluctant to lend on these properties.“However, specialist lenders, who take a bespoke approach to each case, will be more willing to look at the property and help wherever we can.”