Understanding start of the mortgage process can help decide the outcome – Firth

One thing they tend to have in common is that they deal with the end of the mortgage process – what mortgages have been taken out and for how much.

Knowledge Bank’s quarterly data is concerned with what brokers are looking for at the beginning of the process, not what they ended up with, so this reflects what clients really need.

Publishing this information may well change the future shape of the market as it shows the needs of clients at the outset and therefore the products that lenders really need to provide.

Borrowers lives are complex and so are their financial needs and the more we understand the better we can, as an industry, serve their needs.

Residential

For the second quarter running the most popular residential search was for lenders who would accept a self-employed borrower with just one year’s accounts.

Although many people still consider the self-employed to sit outside of mainstream lending the number of self-employed is increasing steadily, jumping from 3.3m to 4.8m since 2001.

So, maybe the fact this has been the top search during the first half of the year will be inducement enough for lenders to consider adopting this criteria if they are not one of the twenty who already do so.

Additionally within the residential sector brokers have clients for whom their age at the end of the loan term is a major consideration.

The second most popular search in this category is once again the maximum age of the borrower at the end of the mortgage term, suggesting borrowers are aware they will need their borrowing schedule to extend beyond retirement age.

As the age of first-time buyers continues to extend into their thirties, it makes sense they will increasingly need to borrow until an older age and this will become the norm rather than the exception.

Buy to let

Within the buy-to-let sector, harsher affordability criteria and more stringent stress tests could be the reason the number one search performed is once again minimum income requirements.

It also highlights the role a landlord’s income now plays when taking out a buy-to-let mortgage, where a few years ago this would have entirely been based on rental income.

The second most searched criteria was for first-time landlords, demonstrating that, despite the government’s best efforts to make buy-to-let less attractive, there are still a notable number of people wanting to enter the market for the first time.

Further reflecting the effect that changing regulation is having, first-time landlords was this quarter overtaken by brokers looking for lenders who will lend to limited companies.

With the continued shift in the market, this could well reach top spot next quarter.

Equity release

Within the Equity Release sector there has been a more significant change in the searches performed.

During the first quarter borrowers were more concerned about fiscal restrictions in the form of maximum lending, debt and interest-only availability.

This has changed during the second quarter of the year and brokers are now looking to place cases focused on property restrictions and leasehold conditions.

With the government looking to either abolish or heavily restrict new leaseholds, it is interesting that this is already being reflected in what brokers are searching for.

Second charge

Criteria sourcing for second charges has also seen a shift in emphasis.

January to March was very much focused on immediacy as brokers were sourcing lenders who do not impose the six-month rule.

However, in the second quarter to June this changed and it was loan amounts and affordability that took centre stage.

The search for maximum loan to value (LTV) and arrears raises the question of how many of these searches for second charges were being done as an alternative to a remortgage?

This could be as the remortgage LTV limits would be too restrictive or the client would not qualify because they had incurred arrears since taking out their first mortgage.

These statistics show us what’s happening at the start of the mortgage process giving an indication of what we may see in completion figures further down the line.

At the earliest stage of the advice process, clients are revealing their financial circumstances in the hope the broker can find a lender to offer them a product.

But not every potential borrower finds the lender they need.

Let’s face it, which would you find more interesting; last week’s horse racing results or next week’s?