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Small mutuals stand out on complex cases, but lenders need to innovate more ‒ analysis

  • 26/05/2023
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Small mutuals stand out on complex cases, but lenders need to innovate more ‒ analysis
Brokers have reported that small building societies have been consistently helpful with more complex cases and affordability, and have urged lenders to do more to support these clients.

Some mortgage firms have recognised the growing issues around complex affordability, with Mortgage Brain and Accord this week announcing plans to hold a free webinar on the subject.

Brokers told Mortgage Solutions said that there is a great need for lenders to provide greater support to clients with complex circumstances, and to follow the lead of small building societies.

Failing to deliver on innovation

Dominik Lipnicki, director of Your Mortgage Decisions, said that pressure had been put on affordability through the combination of the pandemic, the cost of living crisis and the spike in inflation.

He added that at his firm, advisers are encouraged to share information between the team on complex cases, improving the chances of a case being placed successfully.

He added: “Many lenders, however, are slow to accept that the way we work and earn has changed in recent years. Inflexibility when it comes to retirement age or the way that unsecured debt is counted within an affordability calculation can prove a challenge. We often see new entrants to the market promising to be innovative, in recent times, this has rarely been the case.

Lipnicki argued that it is self-employed borrowers who continue to suffer the most, with no real improvement on what lenders were offering.

“Those on lower incomes are also falling foul on affordability as lenders recognise that that section of the market has been hit the most by the cost-of-living crisis.”

Lenders have limited room for manoeuvre

There are more complex cases than ever now, agreed Aaron Strutt, product and communications director at Trinity Finance, who observed that many borrowers have “tricky financial situations” and so are turning to brokers for help.

He added: “It is quite incredible how many people struggle to meet the lender’s acceptance criteria and it can be quite frustrating not to be able to find an option for them.”

He noted that there are particular issues with those on smaller salaries and the self-employed, adding that while it appears that more lenders are offering to help with complex cases they only have “pretty limited room for manoeuvre, which isn’t always much help”.

Building relationships is key to helping clients

Sebastian Riemann, director of Virtus Private Finance, said that the shift away from the traditional nine-to-five, PAYE job has been going on for over a decade, and it has always been a case of knowing what lender is comfortable in each area.

He argued that the “beauty” of the market is that there is something available for most people, with brokers able to work out where to place individual cases.

Personally I still believe the key to all of this is experience and a good network of contacts. The main reason I always encourage in person BDM visits is that they can provide information on niche areas and widen your knowledge even if it doesn’t appear relevant at a given point in time it provides great reference points,” he continued. 


Smaller building societies stand out

Jane King, mortgage adviser at Ash Ridge Private Finance, said that many of her clients fall into the complex boat, meaning that she has to use many lenders who are not on the high street, but who are able to consider such cases.

According to King, these are often smaller building societies or intermediary-only lenders, who use manual underwriting.

She added: “They tend to be very experienced, understand how to read a set of accounts and are happy to take information from accountants as part of their affordability calculations. These can be very difficult to verify if income is coming from several sources. They are a valuable sources of lending as you can often chat through a case with an underwriter before and during the application process.” 

This was echoed by Riemann, who said: “Mainstream lenders such as Accord and the Coventry have been stand out providers for self employed and taking a sensible approach in recent months but there are too many to mention. Many smaller building societies provide a fantastic service in this field too.”

All cases are complex now

“Everything is complex and specialist now,” argued Martin Stewart, director of London Money, to the point that such terms are redundant. He suggested that it would be better to accept that we now have a “normal market navigating through extraordinary times”.

Stewart said that a good broker will handle all enquiries in the same way, starting with getting a thorough understanding of the client’s situation, before moving forward with a shortlist of lenders.

They will then investigate the nuances of each of their respective criteria to then assess which one has the highest likelihood of achieving a successful client outcome,” he concluded.

Greater complexity for self-employed borrowers

Richard Dana, CEO of Tembo Money, agreed that there was increased complexity with self-employed income, as well as with light adverse “as people have struggled to keep up with payments and financial commitments during the cost of living”.

He said that lenders have amended their affordability calculations to reflect the cost of living increases and the impact this has had on disposable income, combined with higher interest rates.

There are a growing number of lenders who offer innovative products to help address more complex client demands. For first time buyers, Generation Home and Skipton are the current stand outs with their JBSP products. For later life products, Livemore is a great provider with a sensible approach to underwriting,” he concluded.

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