Green shoots in complex lending market – Hall

by: Tony Hall, head of business development, Saffron for Intermediaries
  • 13/06/2024
  • 0
Green shoots in complex lending market – Hall
Over the last few years, the mortgage landscape has changed quite dramatically. The cost-of-living crisis, interest rate rises, and shifts in how people earn their money have all reshaped borrower needs and circumstances.

As a result, the traditional ‘one-size-fits-all’ approach to mortgage lending is becoming increasingly irrelevant for many borrowers, with complex lending – which grew by 328% between 2009 and 2021 – growing into a much more active part of the market.

As part of the broader shift to more flexible working practices, over 20 million people in the UK – more than a third of the adult population – are now considered multi-income individuals. It’s a group that encompasses a wide range of professionals, including business owners, sophisticated investors, and freelancers.

These more fluid incomes add another level of complexity to product sourcing and affordability testing, and brokers and borrowers are increasingly leaning on adaptable lenders like Saffron who can create bespoke financing solutions.

 

Self-build an active corner of the market

With housing demand continuing to outstrip supply, we are seeing interest in self-build grow year-on-year. Historically, borrowers have primarily been attracted by the control over design, but new self-builders are realising that these customised properties can also be cheaper and more energy efficient in the long run than buying an existing property. Brokers should be highlighting these benefits to clients and show how – with the right planning and funding – self-build projects can be relatively straightforward and rewarding.

 

JBSP mortgages offering helping hand to first-time buyer lending

Joint borrower sole proprietor (JBSP) products are also becoming increasingly popular. With parents feeling the pressures of the cost-of-living crisis, these products offer an alternative way for them to help their children achieve homeownership, without gifting or loaning a deposit up-front.

In fact, JBSP mortgages accounted for 5-7% of all first time buyer purchases last year. While a fantastic form of support for those able to access it, it does add another layer of complexity for brokers who are tasked with reviewing and verifying the documentation and source of funds, and assessing the true loan-to-income (LTI) or loan-to-value (LTV) ratio.

 

Growing market for larger loan lending

Savills estimates that there are over 670,000 homes valued at £1m or above across Great Britain, up 28% on 2019. We are seeing demand for large loans grow as a result.

At Saffron, we’ve listened to broker feedback and evolved our offering by reducing rates and increasing maximum loan sizes to £3m and £5m for our owner-occupied and owner-occupied large loan ranges respectively.

There have always been complex elements in the UK mortgage market, but the volatility over the last few years has certainly driven strong growth in these smaller pockets.

To respond to these changes, lenders and brokers are working together to ensure there is sufficient product availability and flexibility to give borrowers the best chance of finding a solution that works for them.

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