That pricing is so competitive should encourage the industry to ask questions about risk and reward – that is only responsible.
It may be more than 10 years since the last real mortgage price war, but there are those of us who remember the dangers of letting hunger for market share take precedence over pricing for risk.
This mortgage price war is different from the last. In the run up to the credit crunch, pricing across borrower profiles disconnected from the risk they represented.
Customers were given discounted introductory rates and suffered the inevitable payment shocks further down the line.
This time is quite different.
The Mortgage Market Review has ensured that affordability assessments have remained rigid and robust – regardless of the price of a product.
With uncertainty surrounding Britain’s withdrawal from the European Union and downward pressure on productivity enduring, it’s likely that base rate will not rise swiftly over the next year or so.
Borrowers – those who take advice more so – are far more protected than they used to be.
Harder to get a mortgage
However, it’s important we remember there is more than one kind of borrower.
The way the pricing conversation happens in the media lends itself to describing the whole of the mortgage market as one homogenous pool of borrowers.
Nothing could be further from reality – as brokers know only too well.
For example, research from Which? found that 71 per cent of the UK’s rapidly growing self-employed population believe their employment status makes it harder to get a mortgage.
There are currently 4.92 million self-employed people in the UK, according to the Office for National Statistics.
That number is likely to grow over the next few years as more companies opt for flexible contract-based workforces they can scale up and down quickly and cost-effectively in an uncertain economy.
Confidence in their commitment
These borrowers are often extremely industrious and financially savvy – they have to be, working for yourself comes with considerable financial responsibilities and requires careful budgeting.
Often, these are people who employ others as well – if they have the responsibility of carrying out payroll every month to allow all of those workers to pay their own mortgages, I personally have confidence that they are likely to show that same commitment to paying their own.
Large scale lenders like straight-through processing, easy algorithms that allow for quick underwriting and low risk. Borrowers who fall outside of these parameters have far fewer options.
But, there is still significant appetite to support the self-employed in homeownership.
It’s no secret that specialist lenders such as ourselves, non-bank lenders and the smaller building societies have recognised how under-served this contingent of society is and have developed our processes specifically with them in mind.
When you meet these individuals personally, the decision over whether or not to lend seems a no-brainer.
It’s why we’ve spent so much time speaking to brokers and underwriters about what they need to get these deals over the line.