Lenders have to adapt to develop solutions relevant to how people live now, suggests Foundation Home Loans
The following article is supplied by Foundation Home Loans
The modern economic climate continues to place even greater demands on the mortgage market to generate competitive, flexible yet responsible products to help both potential first-time buyers onto the property ladder and existing owner occupiers to reach the next rung.
However, many borrowers continue to slip down the mainstream lending criteria cracks. This is not necessarily down to bad credit ratings, patchy employment histories or being held back by excessive outgoings but due to life events, their employment status, having too many income streams or simply being that bit older than what has traditionally been seen as the ‘average’ borrower.
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We talk a lot about complexity in the specialist residential market and, as I’ve said many times before, this comes in many shapes and forms. But, as lenders, we have to evolve and adapt to filter through many preconceived complexities in order to develop solutions which are relevant to how people live now, how they generate income in the modern age and how they are being impacted by events, often beyond their control.
For the purpose of this piece, I’m going to try and keep it simple by focusing on a borrowing type which, on paper, might seem to tick many of the more traditional mainstream criteria boxes. Although it remains evident that a growing number are falling short of these prescriptive requirements time and time again. I’m referring to people who are deemed to be ‘professionals’ in their chosen fields.
Let’s take a dentist for example. I expect everyone reading this would not raise an eyebrow at a dentist being described as a professional given the levels of qualifications and training required to achieve such accreditation. However, many dentists are self-employed and can generate several different sources of income be this from private work, PAYE income from being an NHS consultant, from product sales, specialist procedures and referrals.
We recently had a case where a 50-year-old self-employed dentist was looking to purchase a residential property after becoming a widower but due to having several sources of income and given his age, his broker struggled to place him with a mainstream lender. Due to having the manual underwriting capabilities to consider 100% of this income in our calculations, and with his profession not involving manual labour, we’re able to meet his borrowing requirements and offer a mortgage term up to the age of 75.
This is just one example of a professional who has taken a long educational path to gain the relevant qualifications – even already having a long and rewarding career in this particular case - with a strong level of future income security who has struggled to secure a mortgage with a high-street lender. And this is why brokers and a growing number of professional clients are turning to the specialist market to secure the mortgage finance they need.
Since we launched our Professionals mortgage range towards the end of 2021, this has played an increasingly important role within our overall residential proposition and has become an extremely popular option amongst our intermediary partners. It has also opened the door to plenty of feedback along the way around how we can extend availability from an eligibility and criteria perspective to allow a wider variety of client types to secure such a product. It led us to expand the eligible professions – without diluting the professional tag - and to look at moving our minimum age down to the same as our standard residential offering.
In some cases, 6x income may be available for residential applicants who sit within this professional bracket, and it can also encompass a wide range of different incomes. In some cases, the second applicant doesn’t even need to be classed as a professional, as long as the primary applicant is, and their income is sustainable. We appreciate that our intermediary partners and their clients are looking for additional support from an affordability perspective in the current marketplace and our BDMs are working harder than ever to ensure they are available to discuss how we can help. Being armed with the ability to liaise directly with our underwriters means our BDM team is able to get a quick decision for those brokers who have already gone through the process on the high street and failed, meaning that the specialist mortgage market is swiftly becoming the first alternative rather than the last.
Grant Hendry is Director of Sales at Foundation Home Loans
