IMLA’s latest research report explores the challenges the industry faces in serving these borrowers following post-financial crisis mortgage regulation, culminating in the Mortgage Market Review (MMR).
The obstacles it identifies include where the unpredictable incomes of self-employed borrowers, and the unpredictable retirement incomes of older borrowers with defined contribution (DC) pensions, have the potential to dampen lending to both parties.
Borrowers with adverse credit histories have also encountered increasing difficulties when trying to access mortgage finance, which has predominantly been driven by the industry’s desire to avoid the risks associated with sub-prime lending. The new regulatory landscape also possesses a challenge when it comes to serving complex credit cases, as asset-rich individuals can come up short in the comparison of income and expenditure within affordability assessments.
While market controls are an absolute necessity in the modern marketplace, a measured approach is needed to ensure that ‘non-standard’ is not automatically judged to be unworthy of credit.
For the most part, MMR has not prevented lenders from continuing to service these borrowers and one of the results of a smaller market with more competing lenders is that there are plenty of avenues and options on the table.
Nonetheless, some fine-tuning is needed when the FCA’s thematic reviews report back in 2015: most obviously around the boundaries of responsible lending and how this affects loans that stretch into retirement. This will ensure that significant – and growing – sections of the population can continue to access the mortgage finance they need.
Peter Williams is executive director of IMLA
