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Self-employed and older borrowers key criteria for brokers – Firth

by: Nicola Firth, CEO of Knowledge Bank
  • 18/02/2019
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Self-employed and older borrowers key criteria for brokers – Firth
Overall, 2018 was a turbulent year for the lending community set against a backdrop of a full year of Brexit planning, or not, depending on your persuasion, and a fairly stagnant housing market.

 

Brokers have also contended with new lenders entering the market with a raft of new products, underpinned with increasingly innovative and complex underwriting criteria.

As a result of this market movement we’ve seen a significant increase in criteria. Brokers are faced with searching through more than 90,000 pieces of criteria from more than 200 lenders.

So it is interesting to close off another year by looking at the popularity of searches for the final quarter of 2018.

 

Residential

As you can see from the results, brokers searching for lenders who would accept self-employed applicants with just one year’s accounts remained the top search in Q4, as it was for the whole of 2018.

Given the range and scale of criteria within the residential loan sector it is extraordinary to see that one search is consistently the most popular.

However, given the rapid growth of the self-employed sector in the last decade, and the long-held beliefs that their own banks won’t lend to them, perhaps it makes it less surprising to see this result from the intermediary channel.

It is also worth drawing special attention to the second most popular search which is the maximum loan to age which shows that borrowers are challenging their brokers to find the longest possible loan terms.

  1. Self Employed one year’s accounts
  2. Maximum age at end of term / Loan to age
  3. Help to Buy / Equity loan scheme

 

Buy to Let

Fourth quarter searches for buy to let loans revealed that once again brokers were looking to help first time landlords break into the buy-to-let sector.

Despite the loss of tax incentives for landlords during 2018 the buy to let sector seems to demonstrate a remarkable resilience, perhaps strengthened by depressed house price growth and rising rents.

  1. First-time landlord
  2. Lending to limited companies
  3. First-time buyers

 

Equity Release

Equity release was one of the stand out sectors in 2018. This sector has doubled in size in just three years and 2018 was a record year for new lending.

We can see from the most popular searches during the final quarter of 2018 that the lending criteria most important to potential borrowers is the maximum age lenders will consider at application and the maximum loan to value.

  1. Maximum age at application
  2. Maximum loan to value
  3. Early repayment charges

 

Second Charges

For those brokers looking at the secured loans sector, searching for the maximum loan to value permissible ends the year as the most popular search within second charge loans.

This is understandable, considering the product type, but perhaps an early warning for the sector in 2019 comes from the second and third most popular searches which are debt management and debt consolidation.

  1. Maximum loan to value
  2. Debt management plan (DMP) Ongoing / Current
  3. Capital raising – Debt consolidation

 

Self-build

The self-build sector continues to thrive as people look to make the dream of building their own home a reality.

As might be expected the criteria of most interest to borrowers is the maximum that they can borrow and whether this can finance the purchase of land.

Although this isn’t a huge market segment it is a terrific example of how important it is to keep pace with complex criteria conditions.

  1. Maximum loan to value
  2. Lend against/Finance purchase of land
  3. Custom build – maximum loan to value/cost

 

Bridging

Since the last quarter we added bridging and commercial as criteria search categories and I promised to report on the top searches performed by brokers in these areas.

It is worth noting that the addition of these two new sectors added over 10,000 individual criteria to the system.

Being able to report on a complete quarter of searches reveals that the most popular search made by brokers was for regulated bridging – a bridging loan made against a residential property.

Bridging is a fast moving and growing sector which means that brokers advising on these loans have an increasing challenge to keep pace with product innovation and changing criteria.

  1. Regulated bridging
  2. Maximum loan to value for bridging
  3. Lend in Scotland

 

Commercial

The commercial loan sector is another that looks set for growth in 2019 and this is already one of the most used search categories.

Despite its rather specialist pedigree, the commercial loan sector is one that is welcoming new brokers as well as new customers.

As a result there is a need for brokers to have the ability to interrogate product options without specialist experience.

  1. Commercial investment mortgages
  2. Semi-commercial properties
  3. Maximum loan to value

 

To close off the results from 2018, it’s worth drawing attention to recent news of lenders who have halted all lending as funding lines have run dry.

This shows the demand for specialist products exists and it follows that this market will need to be satisfied by other lenders who will have different credit and risk profiles and attitudes to risk.

So it seems placing these cases will become even more of a challenge in 2019.

 

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