Brokers/Financial Professionals - your view

MJP43

Hi all,

Sorry to go everso slightly against the flavour and content of this forum, but genuinely interested in your opinion on the mortgage lending industry in the current economic climate and in light of recent legislation (MMR etc)

I ask this question as a trade credit risk professional who has been in construction in the last 10 years, and also as somebody who will be imminently in the market for a mortgage.

In my role i.e providing credit facilities to businesses in the construction industry, it is fair to say 2008 onwards we restricrted criteria and clipped credit limits significantly; we even looked very closely at which bank our customers used and their financing facilities, reason primarily being that banks such as RBS were actively exiting out of construction removing overdrafts overnight from seemingly profitable business with full order books which as a result of the removing of funding were going out of business.

Since April 2013 the world has changed. We take more risks and the risk policy has shifted from looking for reasons to grant credit, rather than reasons to refuse credit. Growth is tangible and optimism in the industry is very high. Our fear now are zombie companies and businesses overtrading.

SO question for the brokers etc , as you guys are at the coal face who speak daily to underwriters and business development managers, do you get the feeling lenders have an increased appetite to lend? Fear in construction centred around banks being reluctant to lend to keep their capital base high. Is this still the case?

Very interested in your experiences

Thanks is advance and apologies if posted in the wrong place

amnblog

The Government stripping risk away from Lenders via the H2B scheme has oiled the market.


Other than that, 'appetite to lend' is not a phrase I can relate to.


Lenders tie themselves up with parameters stated to the regulator in terms of how they will and won't lend.

MJP43

So appetite doesn't come into it then? The amount of lending they make is based solely on how many applicants fit criteria?

Thrugelmir

At a macro level banks balance sheets are contracting and will continue to do so. As the impact of the requirement to meet higher capital requirements is met. (Basle 3 requirements aren't required to be met until 2019). As a consequence there'll be a set off between margin and risk. There'll always be lenders with funds available to launch media catching products. These in value terms though will form a very low part of the total mortgage lending market.

Santander a couple of years ago had a stated aim to increase business lending and decrease mortgage lending. Due to the very low profitability. On a micro level mutual lenders (building societies etc) are the ones increasing their mortgage lending while the quoted finance companies retract their positions.

MJP43

Interesting. We in construction are still not seeing a voracious appetite for funding in construction or in credit insurance but it is more available than in 2011 yet a million miles from 2007.