Demand for Specialist Residential Mortgages Increasing

Demand for specialist residential mortgages increased in the first quarter (Q1) of 2017, according to the latest Financial Advisors Confidence Tracking (FACT) Index from Paragon Mortgages, which is based on interviews with 200 mortgage intermediaries.

There was a rise in demand from both self-employed (24%) and complex income (17%) customers, suggesting an increased requirement for specialist residential mortgages and wider availability of products that meet the demands of underserved segments of the mortgage market.

Other customer types were largely unchanged in Q1, with high loan-to-value (LTV) lending at 15%, interest only at 13%, lending into retirement at 11%, low income at 9% and adverse credit at 7%.

The average number of mortgages introduced per intermediary office in Q1 was 20, down from 21 in the previous quarter and the third successive fall. Despite this more recent decline, the number of mortgages introduced has held between 20-25 for almost four years, maintaining a slow recovery tracked from 2009, when the number reached a record low of 14.

The index also shows a positive forecast from intermediaries, with the expected change in overall business over the next three months up for the first time since Q1 2015, reversing consecutive declines in each of the previous seven quarters.

Meanwhile, mortgage advisors expect to do 2% less buy-to-let mortgage business over the coming year. This, however, is up on the previous quarter and, following the largest ever decline seen in Q1 2016, the average now appears to be on a modest upward trend.

Asked about the importance of the Prudential Regulation Authority’s (PRA) new affordability rules in estimating the expected change in their level of buy-to-let mortgage business over the next 12 months, more advisors (85%) said that the changes had been at least quite important, up from 80% in the previous quarter, while just 10% said they were not important.

The Managing Director of Paragon Mortgages, John Heron, comments: “It’s encouraging to see increased demand and greater availability of specialist mortgages. Customers with complex incomes deserve access to a wider choice of mortgage products and to specialist underwriting that recognises their unique circumstances.”