Brokers expect Secure Trust Bank to exit the mortgage market for the foreseeable future if the plan to stop originating new mortgages goes ahead.
The bank’s chief executive Paul Lynam said the proposal is to stop issuing new mortgages “until conditions become more favourable.”
But experts don’t expect the lender to return in a hurry.
Ray Boulger, senior technical manager of John Charcol said: “Their statement suggests it could be short-term, but they may need to make redundancies or reallocate their origination department which means if they come back in they might have to hire them again.
“The cost of getting back in the market is quite significant which suggests this is not a short-term decision.
“If they are pulling out because they are struggling to make adequate margins I struggle to see when they can come back in.”
David Hollingworth, director of communications at L&C Mortgages, said: “I think this is a case of ‘for the foreseeable future’ without ruling out coming back if things change.
“The market is only likely to be more competitive in a flatter market – everybody is scrapping harder to take their share.”
Both Boulger and Hollingworth expressed surprise at Secure Trust Bank’s proposed exit.
However both concluded the lender must be struggling to achieve desired margins owing to strong competition in the complex residential mortgage market, which the bank only entered into in March 2017.
Speaking of competition, Hollingworth felt the increased appetite from high street lenders for complex applicants like contractors has made it harder for specialist lenders to find a niche.
Jonathan Burridge, sales manager of The Mortgage Broker, impled that his own experiences explains why Secure Trust Bank is considering exiting the market.
He said: “We transacted a low volume with the lender last year and the cases that were placed with them were extremely demanding in terms of criteria, so it is not hard to see that their market share was likely to be limited.
“The market is highly competitive and to either carve or create market share requires innovation, marketing and resources all of which mean deep pockets and a patient backer.”