Mortgage applicants from black, Asian and minority communities may be met with scepticism and have to provide more information to support applications than a borrower from a traditional white household, according to brokers.
Multigenerational households are common among Asian communities with bills shared by those earning, but standard mortgage criteria is often not equipped to deal with these cases, Dina Bhudia, director at P2M Group has found.
“Underwriters will ask me why I have only put £50 down for food [on applications]. I have a sense they think that I am lying to them,” she said.
In one household for Bhudia’s clients, there could be five or six breadwinners, yet typically no more than four people are allowed on the application, putting a huge constraint on affordability.
Furthermore, having additional family members living in the home “add layers of bureaucracy” with lenders.
Bhudia said: “Things don’t fit the picture of what underwriters think – they are not looking at the reality of the situation.
“I feel that underwriters don’t get it, and if they do, it’s a very grey area.”
Onyi Ibeke, mortgage and protection adviser at Tenet, described how her clients with links to home countries in Africa, either through property or sending money home, have struggled with lenders.
In Nigeria, some women take part in susu savings schemes (also known as sousou or asue) whereby each member contributes money, with lump sum payouts then rotating among the group.
Ibeke had a client whose turn it was to receive the lump sum and wanted to use the cash for a deposit, but it was rejected by the lender because they couldn’t trace the source of the money.
Ibeke said she understood that lenders needed to fight financial crime, but added: “Clearly there is no voice representing these sorts of people. If this was something they were used to it would be different… If they really wanted to trace the source of income, they could.”
In other cases, underwriters fail to understand why bills and a mortgage between a husband and wife will only go in the man’s name, which is typical for Nigerians. Sometimes Ibeke says she is put in a position of asking questions that are deemed offensive to her clients.
She said if lenders took the time to understand genuine scenarios among minority borrowers that would “go a long way”.
Explaining cases to get them accepted
The key to getting cases from underrepresented borrowers through is talking underwriters through the background, according to Akhil Mair from Our Mortgage Broker.
He said: “A lot of Asians and Africans have a different mindset on how they pass on wealth to different generations.”
Deposits often come from family members living abroad, which means it has to pass anti-money laundering regulations.
Mair tends to deal more with specialist lenders as they take more of a manual approach on cases.
He added: “We want more and more lenders on board where we can speak to the underwriter.”
This typically rules out the big mainstream lenders that increasingly rely on automation, but often have some of the most attractive rates.
Mair said there needs to be more supporting the market through “thinking outside of the box” from some lenders where there are automatic rejections.
Diverse products and lenders needed
Rob Peters, principal at Simple Fast Mortgage, believes there is a need for more innovative products to support underrepresented borrowers.
He said: “There is probably a lack of mortgage products to accommodate multiple incomes and shared costs. More to the point, there is a lack of awareness and discussion in the industry about these important topics.”
Samantha Bickford, mortgage and equity release specialist at Clarity Wealth Management, agreed that it would be “great to see more knowledge and awareness of different cultural household compositions among lenders”.
She added: “Considering the shared costs of living in a multiple income household would be a step in the right direction. Perhaps there is space in the market for more diverse lenders to provide a unique offering here.”
Sonya Matharu, senior mortgage broker at The Mortgage Mum, has had success placing such cases with Platform and Halifax – in these instances, unprompted, she provided a write-up explaining the family set-up.
She said: “This resulted in no further queries or questions asked and a mortgage offer issued within the usual timeframes. I do agree that lenders need to have a wider cultural understanding but as brokers, it’s always our job and responsibility to ensure the underwriter understands our clients’ unique circumstances and requirements.”
A UK Finance spokesperson said: “The banking and finance industry is committed to financial inclusion and mortgage lending is provided based on the borrower’s financial circumstances.
“Under FCA rules, lenders are required to undertake a detailed income and expenditure assessment for any new borrowing. Lenders have a duty to lend responsibly and consider the affordability of the mortgage or loan in the long term. It would not be in the customer’s interest to lend more than they can reasonably afford.”
