Data this week from the Office for National Statistics revealed that around one in five mortgage borrowers have reported having difficulties keeping up with their repayments of late. Given a host of spending increases have only just kicked in, like the rise to National Insurance and the increased energy price cap, these difficulties are only likely to get worse in the months ahead.
Brokers have told Mortgage Solutions that it’s crucial for advisers to be proactive in flagging up how they can help with new and existing clients.
No need for extreme cuts
Scott Taylor-Barr, financial adviser at Carl Summers Financial Services, said his brokerage had turned to social media, running a number of campaigns around the cost-of-living crisis.
He explained this was “a way of engaging with existing clients and prospective new clients around helping them to review their finances to see if there is any area we can help them to manage costs, without putting them or their families at risk by doing something extreme like cancelling their life insurance, or home insurance”.
Taylor-Barr noted that the affordability assessments borrowers will likely have gone through suggests that the mortgage is still affordable even with increased costs, but questioned whether borrowers are willing to make the required sacrifices in other areas ‒ like ditching gym memberships or subscriptions to streaming services to do so.
Don’t overlook equity release
Samantha Bickford, mortgage and equity release specialist at Clarity Wealth Management, said it was important for brokers to be proactive in reaching out to clients to ensure they can still afford their repayments. “And if they are struggling, we are best placed to help them with this,” she added.
Bickford noted that for some clients, ditching protection premiums will seem appealing given the economic challenges, but argued that brokers should be contacting clients to help them find ways for this to remain affordable, without it being cancelled.
“Equity release is an important topic to make those in later life aware of. I have seen too many situations where elderly people are property rich and cash poor, and find themselves struggling to heat their homes or have a warm meal. Releasing equity from their property can be the answer to living more comfortably,” she added.
Keeping in contact
Dominik Lipnicki, director of Your Mortgage Decisions, said he was starting to see clients “struggling more, and in the short to medium-term it really does look bleak for many families”.
He noted that his advisers remained in regular contact with clients both by email and telephone, arguing that his philosophy was that brokers should look after clients throughout the life of the mortgage and be on hand to ensure that whatever plans that were put in place are still effective.
Graham Cox, founder and director at SEMH, suggested that the cost-of-living crisis presents brokers with an excellent opportunity to help clients remortgage.
He added: “With property prices so high, many are mortgaged up to the hilt. Suddenly, everyone’s looking to save money where they can, and saving money on their biggest monthly expense is top priority. ”
Lewis Shaw, founder of Shaw Financial Services, said his firm had seen an uptick in interest from clients looking to consolidate unsecured debt into their mortgage in order to free up more disposable income.
“That’s not to say that it’s the right course of action for everyone; however, it’s better to have a debt for longer, even if it means paying more in interest payments overall, if it means you can live affordably and sustainably than getting further into the red, which can ultimately end up in repossession,” he added.
Using specialists ‘more than ever’
Cox noted that adverse credit was becoming an increasing issue for his clients, due to “the pandemic hammering people’s finances.”
He added that this meant his firm were using specialist lenders “more than ever”.
The lender view
Paul Adams, sales director at Pepper Money, noted its own research had found the number of people with adverse credit who had missed a mortgage or secured loan payment had increased from 18 per cent to 23 per cent, and emphasised that brokers have a big role to play in helping these clients find suitable mortgage options.
Adams added: “Lenders like Pepper Money can offer a range of individually underwritten mortgages for customers with a history of missed mortgage payments, and even allow debt consolidation, which can help put customers in greater control of their finances.”
This was echoed by Steve Seal, CEO of Bluestone Mortgages, who said that the growing number of complex cases meant the specialist lending market was coming into its own.
He added: “Brokers can utilise specialist lenders’ manual approach to ensure borrowers are presented with the best solutions for their needs. For example, we are seeing strong demand for remortgaging as borrowers seek to raise capital to consolidate unsecured debt.
“Both specialist lenders and brokers have an important role to play to demonstrate to existing and potential homeowners that there are multiple flexible solutions available to meet their needs in this environment. However, it is key that specialist lenders take a prudent and responsible approach to lending and a proactive approach to affordability so that we can support our customers consistently in the long-term.”