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More help for self-employed borrowers and flexibility on affordability ‒ how brokers would handle life as lenders

  • 11/07/2019
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More help for self-employed borrowers and flexibility on affordability ‒ how brokers would handle life as lenders
Greater transparency on affordability and a more flexible approach to self-employed borrowers are among the things brokers would do if they ever moved into lending, intermediaries have told Mortgage Solutions.


This week online broker Habito announced plans to move into lending as well as advice, having secured £500m in funding from institutional investors.

It has initially launched a range of buy-to-let deals, with a move into residential lending planned for later this year.

And their broker peers are not short on ideas on how they would address the current gaps in the market if they ever found themselves in a position to lend.

Take everything into account on affordability

David Sheppard, managing director of Perception Finance, said that on residential lending he would first focus on affordability, arguing that “so many lenders say they have to ensure a mortgage is affordable and then subsequently want to ignore certain elements of a client’s income”.

He gave the example of airline staff, where plenty of lenders will not use any income that is tax-free, no matter how consistent it may be.

Sheppard also suggested there is room for a self-employed offset mortgage “where an applicant can set up their business banking to be used against their mortgage”.

Target the grey areas

Paul Flavin, managing director of Zing Mortgages, said that he would target the “grey areas” outside of high street banking.

This could include 85 per cent LTV buy-to-let products at pay rate ‒ “How much business could that drag in, despite the government’s best efforts to hamstring private landlords?”

He also suggested there was room for products that offered higher income multiples to first-time buyers if they can prove that they have successfully maintained a higher rental commitment for at least a year, and for self-employed borrowers who have been trading profitably for more than three years.

“In today’s market there’s profit in criteria so, no need to battle over rate,” he concluded.

Spread across the country

James McGregor, director at Mesa Financial Consultants, said that he would focus first on the buy-to-let market to “build my book of assets as low value and try to spread across the country to spread risk”, based on flexible criteria around minimum income and flexible affordability stress testing.

McGregor argued that some lenders have made a mistake by concentrating on specific geographical areas at launch, citing the example of Metro.

“They heavily weighed on London, which clearly come back to bite them.”

Don’t ask surveyors to do what they aren’t trained for

Sheppard added that on buy to let purchases he would allow surveyors to quote both a high and low rental figure based on trends.

He explained: “Too often we see cases end with surveyors being tasked to quote something that they are not directly trained for and often can get wrong.  By allowing them more leeway it would then be more of an underwriting decision based on the overall strength of the application rather than an arbitrary decline or reduced loan.”

The underserved borrowers

James Mole, managing director of London Belgravia Wealth Management, agreed that there was little room in the “high street end of the market”, and suggested borrowers with less than perfect credit scores were currently “massively under served”.

He added: “I’d probably look to see if there was a way to underwrite the self-employed in a better way so that getting a mortgage for them is less tedious. Currently I feel being self-employed is punished massively in the first few years by lenders.”


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