However, traditional lenders continue to be the preferred route for most brokers when advising as banks and building societies still hold the majority of mortgages in the UK.
So this week, Mortgage Solutions is asking: Do you ever bring up innovative lending solutions when advising, provided they are available through intermediaries?
Niamh Byrne, senior mortgage adviser at Financial Advice Centre
We work hard to keep on top of the changes and developments happening in our marketplace and it is a priority for us to build relationships with new and alternative lenders.
As brokers the onus is on us to keep up to date with what is happening in the market that could benefit our clients. Our clients look to us for our recommendations, so we have a responsibility to be well versed and fully researched.
However, at the moment we’re not seeing any real product innovation in the market; some of the solutions are just a different guise for joint borrower sole proprietor (JBSP) mortgages whereas others are a different guise for gifted deposits; which are widely accepted in the mainstream market.
Similar products with mainstream lenders have been available for some time. So these ‘new’ lenders are using marketing to jargon bust complex lending solutions and appeal to a wider audience.
Generally, JBSPs are reserved for clients with these needs and preference as it does not make sense to include a third party on the mortgage if it is not needed.
With the ongoing pandemic and loss or decrease in income we are seeing lots of first-time buyers priced out of the market – using alternate lending solutions such as JBSP and gifted deposits allows access for them where doors have been closed over the last 12 months.
We have already seen an uptake is JBSP mortgages and I expect this to continue until we see a more normal market.
Historically innovation in our industry is driven by lenders and their needs, not necessarily buyer’s needs. It is only through ourselves as advisers and lenders coming together that we will drive real innovation in our industry.
We would very much welcome these discussions instead of simply window dressing existing products.
Richard Campo, managing director of Rose Capital Partners
I have to admit that I am reticent to recommend any ‘innovative lending solution’ when talking to first-time buyers, or any home mover for that matter.
Perhaps it is just my age – yet again – but I have seen many, many schemes come and go since I started in mortgages in 1999.
Personally, I even think Help to Buy is problematic as it is on a par with Shared Appreciation schemes that we saw back in the 90s.
I remember very clearly trying – and failing – to get clients out of these deals well into the 00’s as they can be sticky arrangements if your income does not substantially increase. The issues are also exacerbated if house prices shoot up, as we see happening.
Some of these offerings look like a dysfunctional Tinder to me. Trying to profit from someone’s inability to get a mortgage on their own leads to a raft of moral and technical issues.
How are you going to exit this arrangement? When? How? If 2020 taught us anything, it is that the future is never what you expect it to be.
Moreover, research from the Economic Research Council in 2018 dispelled a bit of a myth of homeownership in the UK. We are a long way down the rankings compared to our European counterparts.
Decreasing homeownership is a very long term trend in the UK. We have a large, increasing population, on a little island, and last time I checked, God isn’t making any more land.
So unless the house building gap and type of home built is addressed, this trend will continue and all these ‘gimmicks’ won’t really touch the sides.
That also perhaps explains why brokers shy away from advising them as we see the pitfalls and will have to be around to pick up the pieces if and when it all goes wrong.
Payam Azadi, partner at Niche Advice
At the moment I’m cautious of deals like this. I believe it still has to stand up on the clients and their income.
I’m still for the idea of ‘if you’re getting, a mortgage, you should get it on your own’. Meaning your own terms and affordability.
There are products that help with a deposit for example and we’re seeing a lot more JBSP-style options on the market. I suspect that will be a bigger trend to come.
We have also seen more enquiries come through for products where multiple applicants want to use their combined income to boost affordability.
The issue with a lot of those products, however, is there are only a handful of lenders that will lend to parents willing to help out.
They won’t do it if parents are of retirement age so that might lead some borrowers down alternative routes if they don’t qualify for mainstream options.
But I think how lenders view income overall is the real challenge borrowers are coming up against.
A lot of lenders are tarring everyone with the same brush – there’s a difference between someone who’s in IT sales and someone who is a restaurant worker. Also, many won’t accept commission up to a point or are restrictive on the self-employed.
Mainstream lenders are the ones who need to have a different approach for this once-in-a-lifetime event that we are going through and lead the change.
The real question is how lenders should see income and the range of services available such as family mortgages will help but there needs to be a new approach in the next year or so.
