Nearly seven in ten (68%) mortgage brokers expect borrowers with non-standard financial circumstances to become the new normal, and 88% say lenders have been too slow to keep up, according to new research from Nottingham Building Society.
The survey of over 500 brokers found almost a third (31%) already see these borrowers with non-standard circumstances as the norm, with a further 49% expecting that within the next 12 months. Nine in ten (90%) believe lenders should prioritise products for a broader range of financial circumstances.
Brokers are clear about where cases stall. Viable complex income applications most often fail at the initial affordability assessment or over evidence and documentation (both 19%), while 18% say differing requirements between lenders are the single biggest barrier to placing a case.
A separate consumer survey conducted among 2,000 UK adults shows the same gap from the borrowers’ side. Over half of those surveyed (58%) believe those with non-traditional incomes are judged more harshly than people in conventional salaried jobs, while 66% believe variable or irregular income is treated as higher risk and makes it harder to secure a mortgage.
For consumers, the widening gap can affect decisions before an application reaches a lender. More than a quarter of adults (27%) said they had delayed, paused, dropped out of or decided against applying for a mortgage because of their income type or pattern. The figure rises to 49% among self-employed respondents.
Life events and past setbacks also remain a key part of the picture, with 60% of adults saying a temporary difficulty caused by illness, divorce or job loss should not count against an application, and 69% wanting it to be easier to explain a change in circumstances to a lender. Brokers agree, with 89% saying lenders should give more weight to a borrower’s current stability than to a resolved historic credit issue.
There is strong public support for a broader view of creditworthiness from lenders, with more than three quarters of adults (77%) agreeing that someone who pays rent on time every month should be able to use this as evidence they can afford mortgage repayments and 59% saying it is unfair for little or no credit history to make a mortgage harder to obtain where someone has not missed payments or had financial problems.
However, just 27% of adults believe that the mortgage application process is a level playing field and only a quarter (25%) of respondents think people with non-traditional incomes are treated fairly by lenders.
Aaron Shinwell, chief lending officer at Nottingham Building Society, said: “Brokers and consumers are describing the same gap from different sides of the mortgage process. People want a fair chance to explain how they earn, what has changed and where they are now. Brokers need clarity about what evidence is required and confidence that a nuanced case will reach someone able to consider the full picture.
“We’ve already changed how we assess borrowers whose circumstances don’t fit a standard model. For self-employed and multi-income borrowers, we look at the wider picture, including day rates, multiple income sources and recent earnings growth, rather than automatically defaulting to the lowest figure. Our dedicated underwriters also take the time to understand complex cases in full.
“However, no single lender can close this gap alone, which is why, as part of publishing this report, we’ve set out a clear roadmap for the mortgage industry to address it together. We are asking lenders, brokers, and the wider industry to be clearer and more consistent about how complex income is assessed, give proper weight to rental history and work collectively to improve fair access for borrowers whose circumstances do not fit a standard model.”
Sue Hayes, CEO at Nottingham Building Society, commented: "The mortgage market has changed, but too often lending criteria has not kept pace with modern day living. Life events such as divorce, bereavement, illness or changing careers are now part of many people's stories, yet borrowers in these circumstances can still find themselves overlooked.
“As a mutual, our role is to look beyond the labels and understand the person behind the application. We believe that anyone with a workable route to homeownership deserves to be considered fairly. That's why we're bringing specialist expertise into mainstream lending and calling for a broader understanding of what a creditworthy customer looks like today.”
