"The rate rise is beginning to be mirrored by mortgage lenders and anyone on an SVR will start feeling it very soon. In addition, the cost of unsecured borrowing is on the rise."
The Bank of England has predicted that Consumer Price Inflation (CPI) in the UK could hit 7.25% by April this year. This would represent the highest inflation level for over 30 years, with over a generation of the public never having witnessed such a sustained hike in prices.
One of the causes (but by no means the only one) is the dramatic increase in the cost of energy. We’ve seen a huge proportion of UK energy providers go out of business recently as the global cost of energy has rocketed and the Ukraine crisis is only going to increase these pressures.
Other factors behind the tough economic conditions are the pandemic and supply chain issues/increased operational costs following on from Brexit. While many people believe these are relatively short-term issues (and they may well be right in the long-run), it doesn’t mean that people aren’t facing real financial pressures right now.
Now, I’m not naturally a doom-and-gloom merchant, but it’s hard to paint a picture which shows these economic pressures ending any time soon. Indeed, the most striking element of the Monetary Policy Committee’s recent decision to raise the Bank Rate to 0.5% was that four out of its nine members actually voted to raise rates to 0.75%.
The rate rise is beginning to be mirrored by mortgage lenders and anyone on an SVR will start feeling it very soon. In addition, the cost of unsecured borrowing is on the rise.
Its times like these that mortgage brokers come into their own, as they can use their expertise and market knowledge to find alternative lending solutions for their client – one which will safeguard their existing mortgage arrangements where at all possible.
While second charges should always be considered by a mortgage broker when a client is looking to capital raise alongside a re-mortgage we know that this is all too often not the case. When I talk to mortgage brokers about this, they often say something along the lines of: “But no one ever asks me to arrange a second charge!” To which my reply is always: “I completely agree and understand, but you will get asked how they might be able to capital raise, of which a second charge mortgage might be a viable a better customer outcome depending on the customer’s need both now and In the future.”
In the current climate of increases mortgage rates, those looking to capital raise, whether for home improvements, debt consolidation or a combination of the two for example, should have an unsecured loan and second charge mortgage explored alongside a re-mortgage.
Of course, those that already have a blemished credit record might struggle to capital raise or re-mortgage with a high street lender; so what are their options?
I would advise looking at the specialist lending market where helping those with credit issues is the norm. For example, at Central Trust, we’ve been around for decades and have seen economic crises come and go. We’ve continued to provide much-needed finance while other lenders have become footnotes in the modern financial history books.
Our mission has remained the same over the years: to help the underserved borrower, as well as those that need to ‘repair and rebuild’. We examine the finances of those that have been victim of circumstance and require a second chance, where it is evident their circumstances have changed but they just need a lender to listen and take a common-sense approach.
In addition, for those mortgage brokers who haven’t much experience of second charges, there are a number of specialist master brokers out there who are experts in helping a mortgage broker navigate the world of specialist lending. I’d urge such mortgage advisers to forge relationships with a master broker so they can work in partnership to provide alternative customer outcomes.
As we all try and ride out the current economic pressures, as finance professionals it’s vital that we don’t write off those with credit issues, or recent changes in employment. It’s times like these when mortgage brokers really prove their worth; there’s nothing quite like a satisfied customer when it comes to client retention.
