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Are non-bank lenders going to rock the majorstream mortgage market?

When insurance and securities companies keep an eye out for the mortgage majors, can atypical financing flows really pose a real threat to large UK lenders? We can argue that the UK mortgage subprime mortgage subprime markets have gone from one booming to the next in the last ten years. In 2007, loans reached a peak of more than £350 billion before falling to £133 billion just three years later.

In the aftermath of the global economic downturn, a busy non-bank community also vanished. The nonbanks are gradually but safely coming back and new, starving challengers' benches have arisen. Nevertheless, the big institutions maintain their grip on the choking markets and lend 7 out of every 10 granted to borrower. There were no fewer than 27 specialised lenders at the top of 2007, many of whom relied on the wholesaling markets to finance new loans.

However, after the outbreak of the global economic downturn, so-called securitization became a swearword after it turned out that lenders - especially in the US - had flogged notes with inferior credit and reported them as AAA-rated. When financing ran dry, non-bank lenders - and even bankers like Northern Rock - went to the wall. What was more, the bank's creditors were not able to provide the necessary funds.

However, since then the wholesalers have defrosted and a number of new specialised lenders have appeared, such as Fleet Mortgages, Foundation Home Loans and Precise Mortgages. Challengers include TSB, which was spun off from Lloyds Banking Group, and Virgin Money. Yet no other creditor has proven able to question the supremacy of the big boy.

For example, Virgin Money, the world' s top bank outside the Top Six, had a 3.4 percent stake at the end of 2016. Not-bank lenders also have fought to make a significant dent in the mar ket shares of the greatest gamblers, many fighting to seize more than 0. 5 percent.

Expert opinion is that any new borrower would take a decade to set up a sufficiently large transaction to defy the biggest UK mortgage lenders. According to Robert Sinclair, Mortgage Intermediaries CEO, Robert Sinclair, "It would take 50 years for a new borrower to grow to the scale of someone like Lloyds by organic growth.

"It' s tough to rescale from the ground up without being worked out by one of the larger institutions like the TSB. Why then is it so challenging for new lenders to construct scales in the present one? One of the main reasons for this is that they have to keep more money than the big bank.

The reason for this is that smaller financial institutions are obliged to charge how much money they have to raise. New lenders must use a standardized costing that requires them to retain more funds. However, establishing bankers use a tailor-made costing system on the basis of their own creditories. Briefly, this means that large commercial banking institutions can borrow tenfold the amount issued by smaller banking institutions, but for the same amount of money.

Bob Young, the fleet mortgage boss who founded the creditor in 2014, says: "We have seen some new lenders do well. He said it would examine the differences between lenders using the standardized approaches and those using their own credit ledgers to determine their own equity standards.

Compared with higher interest payments for postage stamps, a reduction in mortgage interest and stricter credit regulations, credit to lessors has declined drastically. That is important because many start-up lenders are targeting the buy-to-lease markets in order to quickly reach an appropriate level of credit as there is less bureaucracy. John Eastgate, OneSavings Bank's Head of Distribution, says: "It's hard to imagine that [a new creditor will be able to reach a significant size if it is started now].

"£2 was five years to make our own trip. 3 billion a year in new loans. Investments companies such as BlackRock, which provides a financing line for Fleet Mortgages, have tried their hand in the special financing area. But there is little evidence that such companies are willing to enter into the current mortgage credit business.

L&G played with re-entering the mortgage subprime markets in 2013 for the first in 11 years, but finally it postponed its intentions. In five years, the non-bank sector's percentage slipped from only nominally to around 20 per cent. However, the growth in the non-bank sector has been very strong. A non-bank annuity in Ireland challenges the Irish economy by using its resources to grant mortgage loans.

Young-Young thinks that the yields offered in the UK make entering the mortgage subprime markets less attractive.

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