Report shows 76% of originators believe it is "more important than ever"
Brokers are calling on lenders to take a more affordability-driven approach to product development, according to a new report by financial services firm Mortgage Broker Tools (MBT).
The 35-page survey by the London-based company polled more than 400 brokers who said there was “a clear demand for lenders to make greater use of available affordability data in their product development”.
In the report’s preamble, the chairman of the Association of Mortgage Intermediaries, Andrew Montlake, highlighted current economic concerns related to energy price rises and spiralling inflation, which had forced lenders to hike interest rates “on a regular basis”.
Consequently, having access to accurate affordability data was more important than ever, according to 76% of brokers.
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Part of the information brokers and lenders can leverage to assess affordability relates to the types of jobs lenders consider as ‘stable’. Regarding self-employed people, that could be the number of years the borrower has been trading, while working overtime, specifically during the COVID pandemic, would not be considered as part of the person’s future, stable income.
But while mortgage affordability platforms could save time and money for both lenders and brokers, research found that originators were not confident that all lenders would go in this direction.
Only 19% of brokers said they thought that all lenders would take a more affordability-driven approach to product development, while 28% said that only the smarter lenders would go down this route. The remaining brokers said they would like to see this happen but did not have confidence that it would.
MBT’s CEO, Tanya Toumadj (pictured), told Mortgage Introducer that the vast majority of brokers now understood the benefit of leveraging affordability platforms.
She said: “The reason 70% of brokers use affordable platforms for so many cases is because there’s a clear benefit as it saves, on average, 47 minutes per case and helps place the case.”
The changing economic environment, due to soaring inflation and rising energy prices, had stretched affordability and made many lenders change their rules.
“Because of the pandemic, you saw a lot of changes around criteria and affordability with lenders retracting from the market. And now they’re all kind of slowly expanding back in. So it’s complex because the economic environment changes… but also lenders are changing their affordability calculations. And all of this is done behind the scenes, so the broker isn’t always aware of it,” she revealed.
The majority of brokers (86%) also said that mortgage affordability had become more complex, prompting Toumadj to point out that finding the lowest rate was not necessarily the biggest priority.
“Historically, brokers usually just researched on price and chose the cheapest rate, but because of the economic environment, affordability becoming more complex is becoming a larger part of the broker decision, and therefore lenders want products that meet the broker’s client needs; they need to consider affordability more and more, and that’s what we’re trying to get at across the ecosystem.”
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Despite brokers’ doubts about lenders’ attitudes to affordability, Tumadj rejected suggestions that lenders had become complacent due to the high demand for homes in recent years.
She said: “I think there wasn’t data available. I totally understand you can’t build products without it being based on data because you’ve got a responsibility to make sure you’re loaning in amounts that are safe for the customer.
“I think now is kind of the dawn of a new era, where if lenders aren’t thinking about affordability, they’re really missing a trick because now’s the time where it all starts to become available.”
To make the point, she noted that some lenders had been launching affordability-based products over the past few months.
