Editor's note: This brief was summarised by The Property AI Newsroom from a report by Mortgage Solutions. Read the original article for full details.
Lenders Urged to Focus on Risk-Based Pricing in Current Market
Gavin Diamond, CEO of Inspired Lending, has highlighted the distinction between writing business and writing the right business in the current UK property lending market. Diamond notes that while market sentiment remains positive, there is a shortage of good, deliverable deals despite ample liquidity.
Diamond observes that competition among lenders is strong, with frequent incentives such as free valuations, legal fee offers, and headline rates. He cautions that there is a point where pricing shifts from being about risk to being about chasing volume, which can be problematic.
For letting agents and inventory clerks, Diamond’s comments underline the importance of understanding the details behind each deal. He points out that short-term lending is not a simple product exercise, as deals with similar loan-to-value (LTV) ratios can differ significantly in risk due to factors such as asset type, exit strategy, borrower position, valuation basis, and transaction history.
Diamond provides an example where a broker submitted valuations from 2021, which did not reflect current market conditions. Instead of using outdated values, Inspired Lending assessed the assets based on present-day criteria and proposed a structure using additional security. Diamond emphasises that providing realistic and deliverable terms is crucial, as terms that change late in the process can negatively impact borrowers.
The article also stresses the importance of broker advice. Brokers play a key role in explaining to clients why initial rates or terms may change and in identifying which lenders are likely to honour their terms through to completion. Diamond states that while Inspired Lending is open to competitive pricing for the right deal, the company will not compromise on risk-based assessment.
Source: Mortgage Solutions