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Squeeze offers on-balance sheet opportunities

10 October, 2007

With the recent market activities forcing many lenders to reprice their mortgage rates and narrow their non-conforming ranges, Spicerhaart believes there could well be ample opportunity for traditional balance sheet lenders to take advantage and expand their business further into the non conforming arena.

The proportion of non conforming mortgages arranged has fallen over the past month, with the Spicerhaart Financial Services monthly survey reporting a 41 per cent drop in these products in September from 13.1 per cent to just 7.7 per cent of the market share. In the wake of the financial market turmoil, lending criteria were tightened, rates were increased and fewer products remained available to borrowers.

Traditional balance sheet lenders that have not felt the full impact of the repriced risk of borrowing or increased cost of accessing funds could take advantage of the opportunity to expand into this market. Spicerhaart believes demand for non conforming products remains strong, despite heightened consumer awareness of the risks.

Steve Cox, operations director of Spicerhaart Financial Services commented: “The fall in non conforming lending, withdrawal of certain sub prime mortgage products and tightening of lending criteria was to be expected in the wake of the credit crunch. However, balance sheet lenders could rise to the challenge this opportunity provides and further evolve into the non conforming sector, ensuring the industry provides for all of market, maintaining the wide choice of products necessary to suit different borrower circumstances. Of course, an overwhelming consideration will be for advisers to ensure that such products are both affordable and suitable for their clients.”