"We could see lenders expand into new areas, whether that be high street and challenger banks opening up to borrowers with adverse credit, or specialist and complex credit lenders looking at lower margin sectors"
FR: Bluestone recently reintroduced its whole of market Help to Buy proposition – what was behind the decision and what are the challenges and opportunities in this area?
The Help to Buy scheme has played a significant role in helping first-time buyers, however for those with credit issues and irregular sources of income it can be much more challenging. Like most specialist lenders, there has been a continuing trend, even pre-pandemic, of increasing numbers of customers who need support from the sector to take their first steps onto the property ladder. And, our goal at Bluestone is to be able to support these customers in achieving their homeownership dreams.
Following a period of limited distribution and after securing a new funding line, we, at Bluestone, were in a great place to widen our proposition, increase operational capacity, and offer continuity in our service levels, which is crucial in the new build space. This means we are now able to deal with the increase in volumes that come from intermediaries directly, or who use the support of specialist distributors.
FR: How has your proposition changed since the start of the pandemic and what does Bluestone have planned over the next 12 months?
When the majority of competitors retreated at the start of the pandemic, we continued to lend, particularly to those with adverse credit, the self-employed, and to contractors. To keep up with increased demand, we introduced automated valuation models to ensure applications were processed efficiently within the constraints of the challenging market caused by Covid-19.
Supporting the self-employed has been a key area for us at Bluestone. Recognising the complex financial challenges this group was facing we continued to innovate and develop our propositions. This included updating our credit policy to support self-employed borrowers, where we now use applicants’ 2019/2020 income where they can demonstrate earnings in the most recent three months have returned to pre-Covid levels.
And, more recently, we’ve turned our attention to Help to Buy as we look to help more first time buyers who have been disenfranchised by the high street. We increased our offer validity for this product range whereby we are now able to issue an offer for six months with the ability to extend for a further three. Due to the challenges faced in the new build sector, such as shortages of materials, labour, and supply chain issues resulting in delays to the overall build timescale, this was a vital move for us. Moving forward, we’re committed to expanding our new build proposition and will be putting a great focus on supporting those looking to buy their first home.
FR: How will the market continue to change post-pandemic?
We’re likely to see continued growth in the specialist lending market, as growing cohorts of customers emerge with complex circumstances. As a result, we could see lenders expand into new areas, whether that be high street and challenger banks opening up to borrowers with adverse credit, or specialist and complex credit lenders looking at lower margin sectors, creating a more competitive mortgage market.
In my view, there are a couple of areas that have the potential to fundamentally change the market. Firstly, is the government’s drive for Net Zero, especially as the UK’s housing stock is the biggest contributor to carbon emissions. I expect to see support in retro-fitting the existing stock, with a greater emphasis on EPC ratings as well as more initiatives towards green products that truly benefit and drive borrowers towards more energy efficient properties.
Secondly, there will be a greater focus from lenders on new build. Help to Buy has brought confidence to developers and as a result, we’ve seen an increase in properties being built during the scheme’s lifetime, but lack of supply still remains a challenge. As such, I expect to see multiple schemes replace Help to Buy instead of one singular option to help continue the level of house building that is needed, but also offers greater choice to consumers, such as shared ownership or Deposit Unlock.
FR: What would you like intermediaries to know about your lending proposition?
We are open and ready for business. Most lenders to some degree had their service and risk appetite impacted by the pandemic. However, we were one of the first specialist lenders to reopen our books, and as a result, are well equipped to deal with increased volumes.
While we are unable to help every borrower who comes our way, our manual approach to underwriting means we have a better understanding of the nature of a customer’s unique situation and can cater to a whole range of needs including, the self-employed, contractors and those with credit problems.
Underpinning all of this is transparency, which is key to us at Bluestone. Over the last 12 months, we’ve increased the headcount in our broker support team by 300% to improve the broker/customer experience and ultimately help more people move onto or up the property ladder.
FR: If you could read one headline about financial services in 2022, what would it be?
From a lender perspective, I’d love to see a headline like ‘Bluestone continues to deliver excellence in the new build sector’. But, if we’re talking about the industry as a whole, it would have to be ‘the great and successful collaboration’. There will always be challenges in the market, but it will take the new Department of Levelling Up, regulators, lenders and developers to work collaboratively to solve the housing crisis and the affordability issues borrowers face. It is not one group’s responsibility but a collective effort to drive change and innovation to solve these complex but vital issues.
