Remember the days when you had a stream of identikit clients looking for exactly the same mortgage?
No? Neither do most brokers.
Mortgage borrowers have always covered the spectrum from straightforward to unusual or sometimes highly complex borrowing needs.
But this diversity has become more pronounced in recent years, as technology has revolutionised the way we live and work.
At the same time, the post-recession mainstream mortgage market has tightened significantly, not least because of regulation.
As clients’ circumstances and needs have become ever more diverse, those eligible for a mortgage on the high street are becoming fewer and fewer.
But one fundamental holds firm – the undoubted value of independent and professional mortgage advice.
It’s more important than ever for brokers to navigate the growing gap between the range of mortgage borrowers’ needs and the scope of high street mortgage lending.
Mainstream lending has failed to keep up with the ‘new normal’, according to lender Together. However, the specialist sector, supported by intermediaries, has helped to bridge the gap, finding the right deals for clients who’ve been rejected from the high street.
A study by YouGov commissioned by Together found that 54 per cent of mortgage applicants who fall out of the process were denied a mortgage for reasons that could be considered ‘normal’ by most people.
Working for yourself, buying a converted home, being too old or having experienced a credit blip are not exactly unusual or complex needs – yet borrowers have faced rejection for all of these reasons, and many more.
Change for good
The way we earn money has changed beyond all recognition since the 1980s. The growth of technology has led to modern ways of working that we could not have dreamed of just a few decades ago and has been, in part, responsible for more people wanting to work for themselves.
But the Together survey discovered that, of those applicants rejected for a mortgage, 12 per cent were denied because of their employment type, while 3 per cent had insufficient employment history.
They could be newly self-employed, a contract worker or simply had a bad 12 months in business. Whatever the reason, many self-employed borrowers have been unable to get the mortgage they want.
Regulation has a part to play of course, with the self-certification ban in 2014 meaning lenders now have to verify borrowers’ income.
Brokers know only too well the dilemma faced by the UK’s 4.8m self-employed people of reducing income for the taxman then trying to prove to a mortgage lender they can afford to borrow.
Who is excluded?
It’s not just how they earn their money that bars borrowers from the mainstream mortgage market. The type of property your client wants to purchase might not fit the normal criteria of banks. They may want to convert a barn, for example, or buy a high-rise flat.
Their age might also go against them, with 46 per cent of over-55s denied home loans, according to the Together survey, including some who fell out of the process because they were too near retirement age.
A lack of credit history is also stopping some borrowers getting a mortgage with their bank.
These areas of the market are what many of us would deem normal, not niche, and this is exactly where the specialist lending market is thriving.
Today’s specialist sector has rebuilt itself under tighter regulation over the last 10 years.
It is more transparent, more responsible and used more regularly by borrowers who only just fall out of high street lending criteria.
And with such a huge swathe of borrowers now excluded by the inflexible criteria of the big banks, an experienced and trusted specialist sector is an essential piece of the jigsaw.
That is why perhaps the most disappointing finding from the Together survey is that more than a quarter (27 per cent) of rejected applicants, rising to 32 per cent of over-55s, who did not obtain a mortgage were put off ever going through the process again.
They shelved their dream of owning their own property, but if they’d been to a broker with a good knowledge of specialist lending, they could have been in their own home by now.
The mainstream market needs to adapt to the changing world but, until that happens, brokers should be aware of, and willing to consider, all the available lending options for their clients.
After all, the mortgage solutions on offer in the specialist sector are as diverse as the borrowers who need them.