Second charge affordability can be improved by sharing – Steve Walker

Speaking at a recent mortgage conference, the Financial Conduct Authority’s mortgage sector manager Lynda Blackwell highlighted the ‘poor affordability assessments’ that were undertaken in the market, pre-MCD, calling on lenders and providers to be strict in their scrutiny of affordability.

Lenders’ own expectations of their second charge affordability calculators led to speculation that new rules on affordability would affect acceptance rates by up to 30%. Generally, post-MCD we are not finding that to be the case and it’s certainly still possible to source cost effective, competitively priced loans for a whole range of clients – we just have to work harder for them.

It’s a longer process sure, we may need clients to prove income which we previously didn’t need to consider and we have to be more thorough in our assessments. However, the main issue now is speed to ‘yes’ decision.

With the pre-MCD affordability calculators, brokers could assess the market pretty much on the fly with multiples and debt-to-income ratios. Now there is a need to reference multiple lender platforms and a lack of information can make the process more unwieldy for everyone, including borrowers. And that’s where introducing brokers can really help by sharing what they know.

There are a number of lenders which assess affordability using Office of National Statistics data, meaning less information is needed upfront as the lender will calculate statistically whether the customer will be able to afford the loan. However, this is not always the case and where lenders work on actual income and expenditure, if we don’t have the necessary information upfront, we’re left with three options.

We can wait for it and, in doing so, hold up the whole process; make a judgement that the lender will accept the case which is a dangerous move that may lead to reworking the case and customer dissatisfaction; or initially ignore that lender and opt instead for those requiring less information, which is not an option when giving advice.

Brokers will normally have the information on income and outgoings but may not be used to passing this to a master broker – either in a referral or packaging scenario. By volunteering more information at the start you’ll help the master broker or the packager to work faster and more accurately.

Obviously the firm giving the advice will need to verify accuracy but the better the information provided at the outset, the smoother the journey will be for all concerned. If brokers can get in to the habit of sharing any recent income proof or an income and expenditure assessment they have on file, its got to improve service down the line.