It’s no wonder consumers get confused when it comes to mortgages, considering the thousands of potential deals that are out there.
With terms like fixed, variable, lifetime, discount, tracker, buy-to-let, and self-certification being bandied around, one can understand if certain information seems to go amiss when applicants are considering what mortgage to take. Indeed, narrowing their options by discounting certain products is almost a necessicity if they are to avoid being driven crazy.
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Yet, the broker’s role in helping consumers understand what suits them best has been brought to the fore again by research from Mortgage Express. It shows a decided lack of awareness among consumers when it comes to self-certification, with 71 per cent of those questioned not understanding how it works and 47 per cent not knowing what self-certification is at all.
Bearing in mind the fact that self-employed workers now account for nearly one in 10 of the adult workforce – totalling around four million people – and many rely on bonuses and secondary incomes, this is a worrying statistic. As work patterns change, self-certification is becoming more relevant to an increasing number of people.
Andy Wiggans, director of mortgage products at Mortgage Express, comments: “Our findings show that the potential self-certification market is strong and has grown by an estimated 15 per cent over the past four years. Yet, lack of consumer awareness regarding this product is still preventing many eligible consumers from getting on or climbing the property ladder.
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“Although not ideal for everyone, self-certification mortgages can be the solution for those who are dependant on secondary or variable incomes and want to own their ideal home. With the expertise that mortgage intermediaries have, they are ideally placed to demystify self-certification, ensuring that clients are provided with the best guidance possible.”
A rudimentary knowledge
Nevertheless, Thomas Reeh, chief executive of blackandwhite.co.uk, is unsurprised so few people understand what self-certification mortgages are. He explains: “Most customers have a rudimentary knowledge of financial services. They learn 90 per cent of it from their parents and, as self-certification didn’t exist 10 years ago, their information is quite dated. Most are surprised when they sit down with a broker, who has thousands of products to choose from. The advances in affordability and self-certification highlight that the lending community has been creative in dealing with people with different streams of income.”
Reeh points out that consumers could be renting unnecessarily by failing to realise there are alternatives and lenders far more flexible than in the past. “As long as they have a deposit, there are so many new lenders that will accept them as a risk,” he says.
James Cotton, mortgage specialist for London & Country, believes it is natural for people not to know the exact ins and outs of the mortgage market. He says: “People will possibly know that there are mortgages for self-employed people, but they won’t know what they are or what they are called. In a lot of cases, customers wouldn’t need to go down the self-certification route, as being self-employed no longer demands a self-certification deal. The only time it becomes difficult is when is they don’t have full accounts or have been self-employed for a short period.”
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Cotton adds: “There is a difference between not thinking you can get a mortgage and not knowing what self-certification is. However, as soon as people start looking into their options properly, they will discover the alternatives. They don’t need to know the full ins and outs, as there are people that can tell them.
“Self-employed people are not a minority and it would be foolish for a lender to turn those people down just because they are self-employed. They are very good customers. You have to appreciate the mortgage market has moved forward so much in the last few years with criteria and the range of deals. A lot of people still have a very traditional view of mortgages, where they think they need a 15 per cent deposit and only get three times their income. This is no longer the case and the mortgage market is so much more advanced now. In truth, there are quite a few deals out there for those self-employed.”
The benefit of brokers
Reeh adds: “People will never quite understand mortgages, because there is such an array of deals out there. It’s mind boggling just working in the industry, nevermind being a consumer. But brokers do their very best to make sure the advice they give is appropriate, especially as the Financial Services Authority is very concerned with the quality of advice. Brokers can explain the differences between products very well – that’s what we do and we do it better than the high street bank.”
As ever, the role of the broker remains vital in explaining to a client their options and what is best for them. Self-certification is just one aspect of the mortgage world that a client needs to be steered through. Educating the client is necessary to give them confidence in the product, and in their broker.
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