CENTRALISED LENDERS

A number of centralised lenders have been set up in recent years, borrowing funds from big commercial investors or the London money market. The most well known are the National Home Loans Corporation (NHLC), the Household Mortgage Corporation (HMC) and The Mortgage Business (TMB).

They offer mortgages in direct competition with banks and building societies, generally offering loans of lower ‘loan to value’ percentages.

Telephone-based lenders like Direct Line and First Direct are also involved in mortgage lending.

Some centralised lenders treat the mortgage loans they give as securities which they pass on to other investors. This provides another source of funds for further lending and expansion, without having to wait for repayments from existing lending to build up. Borrowers must consent to their mortgages being transferred and the original lender usually continues to administer the mortgage that they transfer. In fact, this is attractive to those who invest in these loans, as they often do not have the expertise or systems to administer the loans themselves. This process is usually referred to as ‘securitisation’.

Since the funds raised by these companies come mainly from the London money market, the rates that they offer are often linked to the rates at which they can borrow in that market.