With interest rates rising an increasing number of clients will be assessing their financial situation. Affordability of products will be the key to put clients in control of their finances and their future. Secured loans are often used for debt consolidation. A broker’s first thoughts will be to offer the cheapest rate, but then they need to look at other options which will help the client achieve their objective. Responsible lenders such as Blemain Finance look to provide a variety of affordable options to respond to this.
Combining Innovative Products
Interest Free Payment Holidays are offered on unregulated loans for the first 3 months of the loan, with no repayments due. This is useful for clients as they get an immediate cash flow to rectify any issues they may have before they start paying the bills 3 months later.
The 2% Discounted Rate offered for 1 year on unregulated loans is useful to give a greater affordability to the client for one year and also helps re-establish a payment profile for credit repair.
With interest rates increasing, a Fixed Rate is offered for 1 year so clients feel more in control of their payments.
Interest Only payments for the full term of the loan are also an option if the client is tight on affordability as long as there is a clear route to pay off the capital at the end of the loan.
The broker can use a combination of these options (e.g. interest only for the full term, with a 3 months interest free payment holiday and a discounted rate for 1 year) to provide a workable solution for their client where they could really reestablish their credit profile and have affordable finance.
For those that need affordability in the short term there is a variety of payment options using bridging finance including roll ups, deferred payments, payment deductions and stage payments for the broker to chose from.
Equitable Charges – putting clients in control
Mainstream and sub-prime mortgage lenders are getting more concerned about the affordability question and an increasing number of these are refusing to give consent for clients. This refusal to allow a client to progress with their plans can be based on the length of time the client has had the mortgage for or if the client has had arrears in the past.
Blemain Finance assess affordability for responsible lending in a ‘common sense’ way. We can take a closer look at the affordability of the client and the impact the loan will make on their current and future position to put clients on a better footing where they are more in control of their finances.
Blemain Finance were first to introduce equitable charges and offer LTVs in line with all their standard products, including payment holidays and discounted rates. This ensures a high level of affordability, control and choice for the broker and their client.
Shared Ownership – affordable housing of the future
As people struggle to get on the property ladder and find affordable housing, one of the future growth areas for finance brokers will be in the Housing Association sector.
Registered Social Landlords (RSLs / Housing Associations) were responsible for more than 2 million social housing units in 2005. 3,700 separate development schemes were planned between 2004-2006 worth £2.6 billion and in excess of 50,000 new units to be built. Over one million homes have now transferred to housing association management from local authority landlords. The transfer can only take place if the majority of tenants voting in a ballot support the move. In 80 per cent of ballots tenants voted yes to transfer.
Often these properties are part purchased using Shared Ownership Mortgages, available from a variety of lenders including Cheshire Mortgage Corporation which offers 100% on any property or for any status of client. Most mainstream lenders will give initial mortgages but no further advances.
With the increase in shared ownership over the last 2 or 3 years many clients now have some equity in their share and are looking to do home improvements, debt consolidation or staircasing to purchase more of the property.
Second Charges are available from Blemain Finance where the client can borrow up to 60% of their share, whether they have full staircasing rights or not.
In conclusion the secured loans market can offer more affordable solutions to broker’s clients, giving them the opportunity to move forwards and be in control. As well as rate, when giving suitable advice to clients, brokers also need to consider lender’s innovations to best match the client’s needs.
