Non-specialist brokers at disadvantage as adverse credit needs rise – Bluestone Supper Club

The rise in people with financial difficulties and therefore needing specialist mortgages was one of the topics of discussion. Attendees also touched on the issues of lender service and relationships with brokers. 

More adversity 

Discussions centred around the fact the specialist market is expected to grow and due to the financial difficulties faced over the last 18 months, there would be higher numbers of adverse borrowers. 

A lender representative said there would be “exceptionally strong demand” for specialist mortgages and the challenge lay in getting brokers to a position where they would competently and confidently support these clients. 

The brokers in attendance agreed, with one saying the low rate market could restrict criteria even further in the favour of clean credit, lower risk borrowers. 

“There’s going to be a growing opportunity for the specialist market,” the broker said. 

However, there was the sense that brokers were not ready for a rise in borrowers in need of specialist help. A broker said most advisers “didn’t have the education”.  

“Anything separate from Natwest, Santander, Halifax – they don’t know Bluestone or what Bluestone is good at,” they added.  

The attendee said: “Right now, I would say brokers as a whole who have buried their heads in the sand for the last two years thinking they were going to live off remortgages, five-year fixed rates and product transfers are not prepared.” 

The broker said customers with a clean credit score would not need advice to complete a simple product transfer and for that reason, brokers who do not deal with the specialist market would be left behind. 

A lack of understanding over the impact of taking out a payment holiday was named as a factor as to why there would be a rise in borrowers with specialist lending needs. An attendee described the use of the word holiday to refer to payment deferrals as “sloppy”. 

However, the attendee said the specialist market could serve as a two to four-year credit repair program to help borrowers get back into the mainstream sector. 

A lender representative said there was naivety on the part of the regulator who originally assumed payment deferrals would not have an impact on future mortgage lending. 

Broker returns 

One broker said advisers could be deterred from conducting specialist business due to the time it took to complete a case, go through underwriting and the overall risk involved. 

“There are potentially millions of borrowers who aren’t being served by these advisers,” they said. 

Another broker disputed this and said as long as advisers understood the criteria, it was not too complicated. 

“I think this is the fallacy – that specialist lending is complicated because it really isn’t. It’s just the set of products are different,” they added. 

The broker went on to say the proc fees gained from advising to borrowers with specialist market needs were also “generous”. 

The broker added: “This is the most sustainable mortgage business because you get people who are in the same predicament coming to you and giving you more business because they’ve been recommended by others.” 

Service levels or client solutions 

Next for discussion was whether the quality of lender service levels outweighed the product itself. 

One broker said service levels were key as by the time most clients had come to their firm, they were already weeks into the mortgage process having been turned down by other providers and were keen to progress. 

A lender representative said Bluestone valued service and expected this was the same for other providers. 

Another attendee said: “I’d argue the thing that matters in the end is the outcome. If it takes six days or six weeks to get there, as long as the customer comes out of it with the right solution that’s what matters.” 

A broker interjected to say outcomes would not take precedence if the client had lost the property in the meantime. 

“There are already stress points within their journey, do we need to add to that? There needs to be an element of transparency with lenders around service. An adviser should be able to be clear and upfront and say ‘if we go with lender A it might take a couple of weeks more’.” 

The broker said this allowed both the adviser and client to make informed decisions. 

Lender and distributor relationships 

Attendees were asked about how the working relationship between lenders and distributors could develop going forward. 

One broker said lenders had to decide whether they wanted to work in partnership with distributors as too many wanted to go it alone. 

They added: “Lenders should be brave enough – it doesn’t matter about size or scale – to approach the distributor. Work out a plan that is helpful for both sides and allow the distributor to be an extension of their business to help them get their name and products on the market.” 

They said lenders who were willing to work with distributors in this way would do well going forward. 

Another attendee said the relationship between distributors and lenders had been “love hate” but with intermediated mortgage sales growing, lenders had to remember that brokers have a huge role to play in the distribution of mortgages. 

A broker said in the mainstream market, lenders tended to upset brokers, but this was less of a worry in the specialist market. 

They added: “The specialist market belongs to the intermediary and long may that continue.”