The lender in question was competing in a space with ample competition from a host of lenders, as well as smaller building societies.
Lenders of a smaller scale can’t compete on price with giants like Lloyds Banking Group as their cost of funds are higher, so they’re commonly forced to differentiate themselves by underwriting manually and catering for those with a lower credit score.
That’s all fine and good, but seeing as we’re talking about a minority of mortgage customers who are in this position, if we have too many lenders vying for too little business some of them are going to struggle to make any money. And with specialist buy-to-let you’ve got an even smaller pool of customers than for owner-occupiers.
With Bluestone it should be noted the market circumstances were very specific, as it was acquired by fellow lender Shawbrook Bank in March of this year.
Seeing as Shawbrook already has a buy-to-let and specialist offering the group has seemingly decided to use the Bluestone brand to build to focus on the residential space, rather than being another lender with a similar offering under the same group.
It makes perfect sense, so it may be more a strategic than anything.
Obviously it’s been a tough year in the mortgage sector due to the environment of rising interest rates.
For me it makes sense. Mortgage lenders need to act smartly and regear their businesses if they aren’t making sufficient money, which leaves space for those that remain active.
The buy-to-let market is shrinking, as there was £38.6 billion of buy-to-let lending between April 2022 and March 2023, down from £37.6 billion from the corresponding period the year before.
In that environment it’s likely there could further consolidation, but it’s better that happens now rather than lenders waiting until they get into trouble.
