In an article earlier this summer on Specialist Lending Solutions, I focussed on an LTV hokey cokey with 90 per cent loan to value (LTV) products being launched then pulled with some frequency.
This remains an ongoing theme as rates and competition continue to fluctuate at higher LTV bands. Despite positive news around the raising of the stamp duty threshold, further first-time buyer (FTB) challenges have since emerged.
One which has generated much debate is Nationwide’s policy shift to allow families to only provide up to 25 per cent of a deposit amount for its 90 per cent LTV first-time buyer mortgage.
This is a classic example of how lenders are constantly having to evaluate their proposition in a bid to balance risk, maintain service levels and stay within responsible lending boundaries.
In fairness this is no easy task but, inevitably, this does impact borrowers and the intermediary community.
With that in mind, I recently asked our advisers how the advice process has changed for FTBs and how different our interactions are with them in the midst of the current lending climate.
A good proportion of their responses focused on credit and affordability.
Declare all student loans
One of the most common is to ensure that clients are aware of the need to declare all credit commitments, upfront.
Income and credit-related scrutiny has, quite rightly, been ramped up from a lending perspective in recent times and clients must share all relevant financial commitments.
This sounds obvious but we have all experienced instances where missed information has caused major delays further down the line and the need for full transparency is greater than ever.
An area highlighted by one of our top advisers is that clients often overlook student loans as being a credit commitment, as these are automatically deducted from pay packets.
However, most lenders will include this in their affordability calculations.
As a specialist mortgage broker, we’re seeing a greater proportion of clients who are not only self-employed but who have a non-traditional income history and a variety of income streams.
Lenders will have different policies in dealing with such cases.
For example, some lenders will consider people to be self-employed if they are employed by their own limited company and have a greater than 20 per cent shareholding.
And it is not always necessary to have two years finalised accounts. So, we need to go far more in-depth when it comes to income-related discussions.
Educating clients, extracting the right information and managing their expectations have always been key components within any advice process but this small sample highlights how there is an even greater emphasis on these factors than ever.
The more thorough and better prepared we are from the onset – in terms of asking the right questions to generate relevant and detailed responses from our FTB clients – the less time we will spend firefighting issues further down the line, and less stress will be placed on the client throughout this process.
Both are positive outcomes and we could all do with working that bit smarter, not harder.