Immigration is one of those words which has a variety of connotations. If you were to believe the right-wing press, you would have had it drummed into your head that immigrants are the greatest threat to society in living memory and that we are being invaded by hoards of them, ready to claim all our benefits and eat all our swans.
But while the numbers that have been coming to the UK over the last few years have been steady, they have provided this country with a variety of benefits – especially those coming from Eastern Europe, who have filled roles which for years had been crying out for skilled labour. According to the Home Office, some 683,000 have arrived since the ascension of eight new EU members in 2004. Their impact, from construction and plumbing to hotels and catering, has been wide-ranging.
Many have now been here for a number of years and are earning a decent wage. Those who came here looking for work have found it, and many are starting to put down more permanent roots. Those young men and women that came here are now bringing the families which they left behind, meaning they want a stable environment to do the things that families do and for many, this means a house and a mortgage.
But while many brokers have started to see clients with an Eastern European background coming through their doors, many are finding it difficult to place them with lenders. The core problem has been information.
Information gap
David Chilves, mortgage adviser at The Clarkson Hill Group, explains: “All lenders have different criteria, but despite the fact most are from within the EU, they still insist on three years of address references and two years of work references. Some lenders are complete no-nos but others can be okay. Where the application usually falls through though is when you need two years’ proof of residence as that can be difficult for many people.”
This information gap is a problem and the current lending climate will mean that lenders are much more constrictive with the risks they take on. Chilves says he gets clients to take on credit cards, advising them just to use £10 a month, just so they can get credit histories. But as Mark Jannaway, director at OC&C Strategy Consultants, insists, it is not so much that these people are poor credit risks, but that they are just ‘information poor’.
“Lenders fail to tell the difference between those who are information poor and those who are credit poor. Regardless of their credit, many people often fall at the first hurdle, which is information. A lot of non-conforming lenders are focusing on CCJs and not helping to fill the gap for those without a history. It’s not so much about where people have come from, but a lack of information which is putting lenders off.”
Open and helpful
But as many brokers are finding out, some lenders are much more open and helpful in placing clients than others. Graham Swann, managing director at Mortgage Innovations, found this out when he went to place business.
“I’ve done two, both with Northern Rock as it was very good. I was expecting all sorts of trouble but the process and the paperwork were the same. I looked at a couple of other lenders, but they were much more difficult.”
For Jannaway, those lenders which are more responsive to the needs of clients who are information poor will benefit in future. He points to a lending environment which will be dominated by personal circumstances, rather than a one-size fits all approach. This means that lenders who look to engage with clients from Eastern Europe and have good underwriters who can assess the genuine credit risk, rather than just dismissing it, will reap the rewards.
“A lot of skilled people have come into the country and are doing jobs that are well paid so it falls back to the underwriting practices and what they can do to try and counter the lack of information. I suspect that if they can build up a credit history by offering current accounts then they will be able to convert them into a mortgage customer. HSBC has recognised this and is tailoring to personal circumstances, with products for those from Eastern Europe and Shariah finance.”
Therefore, as those that have sought a new life in this country firmly establish themselves and look to obtain finance to purchase a home, the mortgage market will have to react to their needs. Many have already sought the independent advice that an intermediary can provide so lenders must be ready to deal with this and provide both broker and client with the products and service this growing niche requires.
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