A diverse range of customer requirements is fuelling the demand for specialist mortgages in the UK, led by people who are self-employed, new research has found.
Indeed, self-employed people make up the highest proportion of specialist business at 21% while those with adverse credit make up just 6% of specialist residential business, according to the latest tracker index from Paragon.
Asked for the proportion of their business represented by different customer types typically classed as more difficult to find solutions for in the final quarter of 2017, intermediaries said that self-employed customers dominated.
This mirrors the sharp rise in the number of self-employed in the UK, up 24% over the last ten years from 3.9 million to almost 4.8 million in the final quarter of 2017 according to official figures from the Office for National Statistics (ONS).
The next biggest group after self-employed is those seeking an interest only mortgage at 15%, followed by complex income and high loan to value both at 14%, and lending into retirement at 11%.
In contrast, low income business made up just 7% of specialist mortgage applications in the fourth quarter of 2017, with adverse credit business lower still at 6%.
The index report points out that adverse credit has consistently been the least dominant factor in the requirement for specialist mortgage lending since the index report began tracking specialist residential lending characteristics in March 2015.
Alongside specialist residential mortgages, some 26% of intermediaries said that they expect to increase second charge mortgage business in the next 12 months, stating that second charge mortgage lending represented a viable alternative to remortgaging and further advances for certain customers.
‘It seems clear from this latest research that complexity around employment and income are the most significant reasons that intermediaries review the options available from specialist residential lenders,’ said John Heron, managing director of mortgages at Paragon.
‘Customers with these characteristics are more likely to benefit from the detailed individual approach to underwriting that lenders in this segment of the mortgage market can deliver. With employment patterns continuing to become increasingly diverse and complex, we may well see this area of the market expanding going forward,’ he added.
