Brokers are still treading carefully with mortgage applications – Firth

Brokers are still treading carefully with mortgage applications – Firth

 

It’s not often we start an article with a quote from a William Butler Yeats poem, but it feels an apt line to describe a situation many brokers have found themselves in recently.  

This particular poem springs to mind at the moment as ‘soft footprint at the decision in principle (DIP) stage’ features heavily in the most-searched terms by brokers recently.  

The popularity of the term suggests some clients are in precarious financial situations and brokers are having to tread carefully as they don’t want the application process to impact future attempts.   

Interest in ‘soft footprint at DIP stage’ peaked this April, and at this stage it was posited that the reason may be that clients’ urgency to get their house purchase over the line before the end of the stamp duty holiday was causing brokers to apply to multiple lenders.  

The inclusion of the term past the stamp duty deadline, however, suggests it is more likely connected to poor finances of clients so that brokers need to shop around more to find a lender that may accept them.  

This is backed up by ‘missed or late payments’ and ‘defaults registered in the last three years’ both featuring in the five most-searched criteria in July. Starting in February, at least one of these search terms have featured, and with some people still struggling financially, it may be set to continue. 

As a result of the volume of searches, there may be more lenders that follow NatWest’s recent decision to switch to a soft footprint approach for DIPs, which would be widely welcomed by brokers.  

 

Freelance criteria restrictive 

Another area where brokers will need nimble feet is when working with self-employed clients. In the past year, ‘self-employed with one years accounts’ has been amongst the most-searched terms in 10 of the 12 months, despite a number of people choosing to go employed as a result of the pandemic.  

Recently studies have shown pessimism from self-employed clients about their chances of getting a mortgage, and it is one of the reasons some are choosing to seek employment instead.  

This pessimism, one could argue, is justified, as lenders have been restricting criteria for those who are freelance, and particularly those that have used the Self-Employment Income Support Scheme (SEISS). 

Some lenders are now using an average of income over the past two years, others will use the lowest yearly total when calculating affordability. Still others are deducting the SEISS grants from income.  

Although these restrictions impact affordability, some lenders are shifting to accept more self-employed clients. NatWest, for example, recently changed its criteria and announced it will accept self-employed borrowers who have historically taken out SEISS grants. 

These are rays of hope for the pessimistic self-employed, and there is potential that more lenders will follow suit, which must be positive news for brokers to give their clients.  

There have been over 31,000 criteria changes in 2021 already on Knowledge Bank’s system, and nearly one in five of those relates to self-employed borrowers. 

With criteria shifting rapidly for self-employed clients, it is increasingly difficult for brokers to keep criteria in their heads or on spreadsheets, so a platform that tracks criteria has never been more important.