The property market has been given a shot of adrenaline by the limited period stamp duty holiday and mortgage applications have skyrocketed, with many brokers saying they have never been busier.
At the same time, lenders are addressing every application with more scrutiny, which means the process is taking longer and the system is becoming clogged up.
So, why are lenders taking longer to review each case and what can brokers and lenders do to improve the situation?
Big shift for lenders
The first thing to consider is that complex is the new normal.
With so many millions of people being furloughed or taking payment holidays on their mortgage and other credit commitments, cases that were previously straight forward, now have different levels of considerations.
This is before you consider the self-employed, contract workers or people who previously had a record of adverse credit.
So, a more hands-on approach to underwriting and assessing the affordability of each case individually is now commonplace.
And this is a big shift for mainstream lenders.
In an article in Mortgage Solutions on the frustrations being experienced by brokers, Payam Azadi, director and partner at Niche Advice, said: “Historically lenders were confident by the aid of technology, but now more and more cases have to be individually underwritten.
“That’s not a problem for specialist lenders but it is for a volume lender. All of a sudden, they have to put a series of manual processes in.”
Communication is critical
It’s fair to say that the requirement to take a more rigorous approach to underwriting isn’t just reserved for mainstream lenders.
Any prudent lender in the current uncertain and unprecedented environment should be taking more steps in its underwriting process to ensure the mortgage will be sustainable and affordable.
However, specialist lenders have built their businesses on taking a hands-on approach to underwriting and so now that this is required on nearly every case, it’s specialist lenders that have the expertise in how to manage, not just the underwriting, but also the process.
A key part of the process is communication.
Specialist lenders often require more documentation to support an application than a broker might expect from a mainstream lender, and so we have worked hard to evolve our processes to ensure we ask for everything upfront and communicate openly with a broker about how these documents are being used and why we need them.
There are also often more contact points along the way working more closely with the broker.
The reality of the current situation is that cases are sometimes taking longer to process and that can be frustrating.
Clear communication and honest dialogue are the two things that can help reduce this frustration and, in the specialist market, these are qualities that have been important to all lenders in recent years as we have identified ways to best support our hands-on approach to underwriting.
Now that hands-on underwriting is becoming more common, so too should proactive communication and honest dialogue.