We now live in a world where people have much more complex incomes and financial backgrounds than before.
Jacqueline Dewey is chief executive of Smart Money People
We now live in a world where people have much more complex incomes and financial backgrounds than before, and so at Smart Money People we wanted to ask brokers what innovations they thought lenders should consider to better serve their clients.
The results form part of our recent Mortgage Lender Benchmark, a bi-annual report on the UK mortgage market.
More help for self-employed clients
Mortgages for the self-employed is something brokers feel particularly strongly about and feedback for mortgages for these clients accounted for 13% of the responses in our H2 2021 Mortgage Lender Benchmark.
However, it’s clear that brokers feel getting a mortgage as a self-employed person is not without its challenges, particularly when considering the difference they perceive between the treatment clients who are employed vs the self-employed face, with brokers saying treatment is ‘unfair’ and the self-employed are ‘discriminated against’ and even ‘punished’.
Brokers also cited frustration at the complex criteria involved in finding a lender for a self-employed client, and many brokers said they would like to see lenders take one year’s accounts into consideration in the underwriting process.
“Self-employed could be better served. Majority want two years books whereas employed just need a contract of employment and not necessarily started work to get a mortgage – it’s a joke.
"If loan-to-value (LTV) is low a common-sense approach would be appreciated. Boils down to cost though, a payslip takes 10 seconds to review...”
“Self-employed criteria is very complex and difficult to fathom right now.”
“Self-employed underwritten as if they are not Lepers - a level playing field between employed and self-employed.”
Higher LTVs and more help for adverse credit clients
Clients who have a less than perfect credit score are another area where brokers feel lenders could be doing more. The main request from brokers was to see lenders introduce more high LTV products for their adverse clients.
Brokers also felt lenders should be able to differentiate between clients who have had a ‘minor blip’ on their credit file, versus those with more serious credit issues.
“More support for clients with impaired credit as moving forward there is bound to me a lot of people with financial difficulties due to COVID.”
“Adverse clients are struggling at present with lack of high LTV products”
“Ability to discern between wanton credit abuse and genuine hardship.”
Greater flexibility within the mortgage
When asked what brokers would like to see lenders introduce, features that would give their clients greater flexibility within their mortgage term was a popular choice.
Within this, the ability to make greater or more flexible overpayments within the initial term was called out as a desirable addition, as was the introduction of a pre-approved drawdown facility, replacing the need for full underwriting at the point of requesting a further advance.
Changes to early repayment charges (ERCs) were another feature that brokers would like to see introduced to give their clients greater flexibility, with several brokers requesting more fixed products that offered no early repayment charges.
“More no ERC products available to allow clients freedom to change based on circumstance.”
“Flexible features – overpay and borrow back at the scheme rate – remember A&L flexible mortgage – it was very popular!”
More help for first-time buyers
It was no surprise to us at Smart Money People that brokers would like to see more support and help from lenders with getting their first time buyers onto the housing ladder.
Brokers have a wide range of suggestions for lenders and perhaps the regulator to consider, including taking proof of rent payments into account for affordability, a return to 100% mortgages and lender gifted deposits.
Making more 95% LTV products available on new build properties was also suggested by several brokers, along with more products that offer intergenerational help including guarantor products and more joint borrower sole proprietor products.
“JBSP seems to be an up and coming query I get a lot but not a lot of lenders like it.”
“Affordability. When I can evidence a client has paid more in rent for years without defaulting and I can get them a mortgage for less but doesn’t fit affordability.”
There is no doubt that lending options for the self-employed, those with adverse credit and first time buyers are improving and more and more lenders are improving their criteria and normalising their offerings after the last two years of the pandemic. However, it’s clear there is still some way to go and so let’s see what the rest of 2022 brings.
