"What happens if they now do not meet the affordability/criteria assessments of their existing lender? Where do they turn to?"
The next six months to a year will be especially telling for the property market as the impact of the pandemic and economic issues such as the pressure on supply chains shuffle through to the employment market.
Early news from the Insolvency Service suggests, at least initially, that redundancies figures in September were close to record lows: many businesses with furloughed workers were reporting that they had taken everyone back, and that the count of jobs ‘at risk’ was among the lowest number since records began. Of course, we must wait and see more data to be more confident of this.
This undoubtedly feeds into how lenders might look at borrowers’ recent financial history, and more importantly, borrowers’ own perception – or misconception - of what their mortgage choices now might be. We recently carried out research, via BVA BDRC, on housing aspirations amongst 300 owner-occupiers and renters, and the results were revealing in terms of how respondents view their ‘mortgage future’.
Almost one in four said they were worried they might not be approved for a mortgage in the future, with the chief reasons for concern being a poor credit history/score (27%), low/unstable income (22%) and interestingly 10% stating that their age might now be a barrier to affordability.
Comments were made from respondents about incomes having dropped, being self-employed and having taken grants, and having ‘bad credit’ – all cited as potential reasons why a mortgage might not be achievable.
Overall, this suggests many would-be and existing borrowers are perhaps not au fait with the specialist lending market and the growing number of product solutions available to them via lenders such as Foundation. There is clearly a need to educate more in this area and, of course, advisers are going to play a major role here, especially if the borrowers’ circumstances have changed and they need to look further afield than their existing lender or the mainstream players.
The research also asked respondents how they had arranged their current mortgage, with 38% suggesting they had done this directly with a lender, 35% via an adviser – plus 11% saying they’d done it via an estate agency adviser and 2% via a new-build development adviser, while 13% said they had used an online comparison site.
Add up all the ‘advisers’ used and it comes to close to half, but considering we believe advisers to be responsible for at least three-quarters of all mortgages (perhaps more) then it is some way down on these figures.
Again, there are clearly opportunities here for advisers to target those individuals who may believe their changed circumstances and the potential difficulties they went through during the pandemic/lockdown, are likely to impact on their ability to secure a mortgage. Especially those who may be more inclined to go direct to a lender – what happens if they now do not meet the affordability/criteria assessments of their existing lender? Where do they turn to?
The answer should be the advisory sector who can of course access the wide range of specialist residential products available to this borrower demographic. Those respondents that used an adviser highlight the ability to find the best lender based on their circumstances, the fact they can choose from a wide range of providers, and the fact they carry out all the legwork as the top three benefits, so it’s important to highlight this, especially if there is a lack of knowledge about specialist residential lending.
Overall, it seems almost certain that many borrowers’ changed circumstances may now see them outside the mainstream when it comes to their mortgage requirements. The good news is they have options which they can access through advisers – that message should ring loud and clear as we seek to help more customers in this position.