There has been a vast amount of change in the first and second charge industry over the last 30 years, particularly with customers themselves and their attitudes towards finance in general.
When I first started, straight from school into Norton Finance, the majority of customers aged over 60 had paid off their existing mortgage, often didn’t have a bank account and were very reluctant to secure any finance on their property. Now when looking at the same customer profile, they have large mortgages outstanding along with credit cards and other debts, and are far more finance aware than years gone by. This can be a positive thing. However I have seen these customers then retire and be in a predicament, especially if they are coming out of interest only mortgages with no way of remortgaging. The emergence and then increase in equity release products over the years is definitely a major help for the older generation offering a facility to reduce their outgoings.
The lending process has changed significantly over this time as regulation has evolved, involving more information being required from clients to satisfy the necessary money laundering requirements. This has become a major issue for the industry. The industry has had to adapt to increased criminal activity, with all members of staff being acutely aware of the need for vigilance and the implications of customers and often introducers trying to falsify applications.
The rates have changed over the years as everybody is aware; they are at an all time low compared to the 16% rates for the first charge business and 30% plus rates for the secured loans back in the 80s and 90s, although the house prices were substantially lower. The income multiples over the years has gone full circle with 4 times the income for single persons, when 1 joint income was the norm in the 80s and 90s, then the emergence of the self certification mortgages throughout the early noughties, and finally reverting back to a more reasonable 4.5 times in the present.
Over the years consumers have become to expect higher standards of living and the increased amount of credit available has lead to people being able to achieve their goals along with a lot of consumers being allowed more than was sensible in hindsight and I feel we are now having to address these issues more and more since the credit crunch. There are more customers with debt management plans and IVAs and the market hasn’t adapted to these customers until fairly recently with the emergence of new lenders with sensible products for customers who have experienced either work, health or marital issues when otherwise they would have continued to pay their debts in a timely manner.
I have noticed an increased amount of customers not being able to afford their current mortgage commitments should they have applied today which is extremely worrying which is why the regulation changes were required and definitely well overdue.
