Despite the headline-grabbing issues facing the global economy, 2025 is shaping up to be a positive year for the UK mortgage industry with great opportunities to be seized, particularly in the specialist arena.
For many brokers, the key to making the most of those opportunities may rest on having the right relationships and knowing where to look for support. Specialist experts can provide that support where necessary.
With two interest rate cuts last year and more in the pipeline, according to the Bank of England, the mortgage market is set for significant growth. The Intermediary Mortgage Lenders Association predicts an increase of 16% in overall gross lending and 14% in buy-to-let lending by the end of the year. Within that, specialist and complex cases are likely to make up a larger slice of the bigger mortgage pie, for a number of reasons.
Several years of challenging economic conditions have led to far more borrowers presenting with complex financial profiles, multiple income streams from different jobs or some degree of adverse credit. In total 294,046 CCJs were registered in the third quarter of 2024, up 13% on the same quarter a year earlier, indicating an upward trend in borrowers falling outside the mainstream and needing specialist solutions.
Meanwhile, demand for bridging finance has been rising rapidly. The total market more than tripled in size from under £3bn in 2020 to over £9bn last year, with further growth predicted this year. Just over half of last year’s bridging was unregulated, the type of borrowing used by landlords and property developers to finance their property projects, pointing to healthy activity in the private rented sector.
Sticking with the private rented sector, the higher interest rate environment has accelerated the trend towards ‘professionalisation’, with fewer amateur landlords and more portfolio investors deploying innovative strategies to maximise returns. By the end of 2024, 30% of portfolio landlords (those with four or more buy-to-lets) owned a house in multiple occupation (HMO), and of those who own HMOs, 40% of their properties fall within this category.
This year is likely to see that trend continue, with more landlords turning to HMOs and multi-unit freehold blocks, and increased demand for the more complex buy-to-let solutions these properties require.
A natural progression for some of these landlords will also be a move into the commercial sector, whether that be the increasingly popular purpose-built student accommodation, retail property, industrial units or office space, for example. The CBRE predicts a 15% increase in investment in the commercial real estate market in 2025.
In fact, all of the market sectors mentioned so far are set to see an uplift in demand this year, along with other specialist niches such as second charge loans.
Seconds are not just for those looking to consolidate debt or finance home improvements, but can be invaluable for those who want to extend their borrowing while keeping hold of an attractively-priced first-charge mortgage.
We also anticipate more self-employed borrowers looking for help to find the best solutions, as lender’s criteria seem to be bucking the trend and becoming tighter for this area of the market.
Many brokers have already diversified into some of these sectors, and others will be thinking about moving into non-mainstream areas to service all of their clients’ needs, increase business levels and get ahead of the competition.
Getting involved in the specialist market makes shrewd commercial sense, not just because it opens up new avenues of primary activity, but because specialist clients can be the most loyal, providing more repeat business. According to research published by UTB in December 2024, 96% of brokers say specialist customers are more likely to use them again than mainstream, due to the extra work the broker puts in, and often because they are helping clients who think they have no chance of success, especially if they have been previously rejected elsewhere.
Of course, the list of specialist areas is long and varied, and it is difficult for any broker to be an expert at everything. In fact, in a pressured market, the time it takes to process more complex cases alone can be off-putting. That is where those precious relationships come into play.
Whether you don’t feel experienced enough to move into new sectors yourself, or simply don’t have the time to deal with specialist cases, partnering with an expert ‘broker’s broker’ means you can cater for a range of clients with specialist needs without any added hassle.
Collaborating with an ally who is highly experienced across all the specialist sub-sectors and can leverage their own close relationships with the specialist lenders on your behalf can be a game-changer for any broker looking to expand their business in the year ahead.
Jo Breeden is managing director of Crystal Specialist Finance
