The UK residential mortgage market is set to grow 56% to £400bn by 2030, according to a new study by Together.

It also predicts that because of the rise nearly 500,000 mortgage applications will be dependent on specialist lenders doubling their market share to 4% of the overall UK mortgage market.

The study, which covered more than 7,000 consumers, was conducted for Together by Opinium and carried out in partnership with economist Dr John Glen, the study covered more than 7,000 consumers. 

Glen suggests that there are two key factors that underpin the forecast growth in the specialist residential market.

These include an increase in potential homeowners falling outside of the traditional mortgage selection criteria in coming years with structural changes such as the rise of the gig economy and the growing trend towards flexible working and the emergence of the non-nuclear family, alter our housing needs. 

Glen notes that the second is the shorter-term risk appetite of mainstream lenders as they continue to tighten lending criteria at the same time as potential homeowners grapple with the current cost of living crisis. 

The impact of rising inflation will also dent potential borrowers’ ability to access consumer credit, he adds. 

In the UK, 53% of the adult population who took part in the study fall into one or more criteria categories classed as ‘non-standard’. 

However, when looking just at those who have applied for mortgages, this rises to 62%, suggesting there is a large existing demand for an even more flexible lending landscape.

Having non-standard income (including multiple and complex incomes or being self-employed) was cited as a key reason for being rejected for a mortgage by 22% of respondents. 

Having thin or impaired credit or being over 55 or divorced and considered a non-standard profile (both 21%) also worked against applicants, as did being in a non-standard buying situation (26%), such as shared ownership, or wanting to buy a non-standard property (12%). 

The study found that a greater level of lending flexibility could help the 19% of potential homeowners who were rejected from the mortgage process in the last five years.

It also highlights the undue emotional and mental stress which can lead to fear in applying for a mortgage, or apathy about the process altogether. 

Glen says the research highlights the clear limitations inherent within mainstream lending criteria which need to be addressed if the government’s housing blueprint is to be realised. 

If the forecast growth in the specialist residential mortgage market does take place, there should be a halo effect in terms of expanding homeownership. 

Glen anticipates a fifth of new specialist mortgages (approx 100,000 applications) would come from borrowers who have not previously had a mortgage. 

Together’s study backs this up, with 13% of respondents who have never made a mortgage application saying this was because they expect to be rejected or be deemed ineligible from the get-go.  

Together group chief executive designate Gerald Grimes says: “Our research into the residential mortgage market highlights the growing need for specialist lenders and the problems faced by borrowers who are categorised as ‘non-standard’ in realising their ambitions to own their own homes.”

“The UK’s mainstream mortgage system just isn’t adapting fast enough to how we live. Every year, an increasingly large group of potential homeowners must navigate a needlessly complex, intrusive, and time-consuming mortgage journey, with many facing outright rejection at the end of it.”

“If our aim is to support ambition and make homeownership more inclusive and achievable, it’s time the industry, supported by the government, rethinks how borrowers can access finance to realise their dreams of homeownership.”