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Non-conforming loans on the rise, claims lender


Non-conforming loans on the rise, claims lender

Growing confidence among lenders has led to a rise in non-conforming loans, according to Jeff Knight, head of marketing at Pepper Homeloans.

Jeff cited research conducted by Pepper Homeloans that found that its brokers had experienced an increase in demand for near-prime lending.

“I don’t think this is because there are more non-conforming borrowers all of a sudden, but because there are more lenders willing to help them and their general confidence has grown since the recession has ended,” Jeff explained.

“We have also seen a rise in CCJs and a fall in arrears, so we have seen lenders see the market differently to the pre-credit crunch days.”

Jeff claimed that this growth could extend beyond Brexit.

“If mainstream lenders tighten their criteria, then there will be an increase in demand in my view.”

Despite this, Jeff admitted that the impact of Brexit was far from certain and not every lender stood to gain.

“…On the whole, any possible impact from Brexit will be more universal across the whole mortgage market rather than specifically for non-conforming.

“Where there could be an impact is on supply of loans due to the way some lenders are funded.”

What are near-prime loans?

Near-prime (sometimes known as non-conforming) loans are loans that do not fall under traditional lending criteria.

Reasons for not meeting these criteria can include poor credit history, excessive loan demands or a lack of security.

What is the appeal?

Traditional lenders may be reluctant to offer near-prime loans as they can pose a greater risk than lending that falls within a prime set criteria.

Jeff explained that near-prime loans could present an opportunity to specialist lenders.

“Since such loans were first developed, [they] have been helping consumers obtain a loan when they would otherwise have struggled.

“For the most part, this is important, not just for the borrower and the adviser, [because it] also has a positive impact on the whole mortgage and housing market generally.”

However, Jeff warned that non-conforming loans should not be taken lightly.

“…It is only of benefit when a lender lends to a borrower who will repay the loan.

“There were many reported stories during the downturn of irresponsible lending.

“While I think such stories were over inflated, the industry must learn from the past and continue to lend responsibly to borrowers who are ‘non-conforming’.”




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