This is compared to the 48 per cent who were successful the first time round before the pandemic. 

The survey of 1,000 prospective homeowners found 43 per cent of first-time buyers were rejected for a mortgage more than once. This was up from the 17 per cent who said this was the case in March last year. 

The proportion of new potential buyers who were rejected once stayed stable, with 38 per cent citing so in March this year compared to 36 per cent last year. 

Multiple barriers 

The survey found first-time buyers were being rejected for more than one reason in many cases.  

Two-fifths were turned away due to poor credit history, up from a fifth last year.  

With a lack of high loan to value mortgages on the market until very recently, some 39 per cent had their applications rejected because their deposit was too low. In March last year, this hindered 19 per cent of first-time buyers. 

Those who were self-employed, with irregular incomes or on a contract were rejected for a mortgage in a third of cases while a payday loan blocked 29 per cent of buyers from obtaining their first mortgage. 

A lack of income was the primary reason for rejection for a quarter of respondents. 

The survey also highlighted a surge in lender errors. Some 35 per cent of first-time buyers were rejected because the mortgage provider made an administrative error, compared with the 14 per cent last year.

Resolving credit issues 

Some 28 per cent of prospective first-time buyers said credit history was a concern for them when getting a mortgage, while 39 per cent said they were working on improving their score. 

A fifth said they worried their credit rating had worsened since the pandemic. 

Having an overdraft was a barrier for 34 per cent of first-time buyers when applying for a mortgage and a gap in employment affected 31 per cent of respondents. 

Student loans affected 26 per cent of first-time buyers and 23 per cent were held back by credit card debt. 

Jon Cooper, head of mortgage distribution at Aldermore, encouraged first-time buyers not to worry about being rejected for a mortgage because options have increased over the past decade. 

He said: “The growth of specialist lenders – who with human underwriting dig into the detail of more complicated applications – have opened the door for those with complicated income streams or credit issues in their past to find a pathway to home ownership.  

“The home buying process can be confusing and complicated, especially as this generation of first-time buyer is more diverse in financial circumstances than ever before.”  

He added: “It may feel daunting at times so we would recommend seeking advice from a mortgage broker that can give a whole of market view, and provide options specific to a new buyers’ individual circumstances.” 

The system which is used by over 8,000 advisers found enquiries for products to suit borrowers with a satisfied default rose 40 per cent since February. This indicated that more people who recently paid off arrears were looking for mortgage options during the month. 

Meanwhile, products for those with outstanding missed payments increased 28 per cent. 

People appear to be taking on more jobs to increase their income too. Searches for applicants with a second job jumped 51 per cent, the data showed. 

Additionally, those on a reduced income still required options. While searches for furlough-friendly mortgages fell nine per cent month-on-month, it was the second most sought for criteria in March. 

Clare Beardmore, head of mortgage transformation and operations at Legal & General Mortgage Club, said: “While it is clear that various government incentives are driving many to push ahead with their homeownership plans, the rising number of searches for lenders who will accept applicants with credit impairments and multiple income streams shows that the economic impact of the crisis continues to be felt by many.” 

Bringing together the key people from lenders, distributors and third-party providers for two days, the event aims to promote debate and reflection for how the market will grow and evolve.

Here are the photos of the action.

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The master broker has launched its service with a panel of nine lenders but expects to grow this to around 12 as it is completing due diligence on further additions at the moment.

Crystal managing director Jo Breeden (pictured) told Specialist Lending Solutions that the firm had been handling ad-hoc enquiries for some time, but that these had begun to grow over the last year.

“We are getting more specialist residential enquiries, it’s becoming a new normal,” he said.

“For example there are more borrowers with county court judgments against them (CCJs) and many mainstream residential brokers don’t have a panel for those types of cases.

“We were happy to pick these cases up to support our broker partners, but we never really had dedicated a team for it.”

‘Surprising growth’

Crystal had been receiving around 10 to 12 enquiries per day prior to forming the team with little promotional work, but Breeden is aiming to reach four times that number by the year end.

A dedicated team with an underwriter and two administration support staff have been put in place already, and if the growth targets are reached this is likely to expand to near double figures.

“It’s all about having the right members of staff and we’re increasing our risk and compliance function as well,” Breeden added.

The level of enquiries about later life lending “has been the surprising growth area” for Crystal.

However, Breeden was clear that there were no plans to expand into the equity release market.

“I would never say never, but that’s not our area of expertise and there are plenty of people who do have that expertise,” he said.

Lender panel

Panel lenders have been sourced from existing partners and new arrangements.

They include Foundation Home Loans, Masthaven, Pepper Money, Precise Mortgages, The Mortgage Lender and Together, with new additions Family Building Society, Market Harborough Building Society and Tipton & Coseley Building Society.

“We do have more lenders coming on board, we’re just finalising the due diligence on those,” Breeden continued.

“We see 12 being the number we want to get to and in that mix every lender to add something different.”

Crystal will continue to support its bridging, commercial, development finance, second charge loans and fee arrangements will follow the firm’s standard approach.

Moneyfacts data published in March confirmed what those of us immersed in the mortgage market have long known – the relationship between Bank of England base rate and mortgage rates has changed dramatically

In March 2009 the Bank of England cut the base rate to 0.5 per cent following stock market crashes around the world as the full effects of Lehman Brothers’ collapse were felt.

Back then, the average two year fixed mortgage rate was 4.79 per cent, according to the data.

By March 2019, base rate had been down to 0.25 per cent and was back up to 0.75 per cent, where it sits today.

The average two-year fixed rate available today is 2.49 per cent. The same is true of the average five-year fixed rate which has fallen from 5.62 per cent to 2.69 per cent.

This highlights just how competitive the market has become in its drive to take market share, particularly on remortgages.

Diverse market

But there’s a quirk in the provision of mortgage finance that can be overlooked when we talk about the entire mortgage market in terms of averages.

The mortgage market is not homogenous, it’s the absolute opposite of this.

Borrowers are individuals and come in all ages, states of earning and employment– no two are ever exactly the same.

This is part of what is so impressive about the mortgage market in the UK; we are ourselves diverse enough to be able to cater for this broad spectrum of homeowner.

However, it’s been said a few times recently that perhaps the market isn’t doing quite as well as it might in terms of serving customers who, when thinking about the language of averages, can be considered outliers.

Bypassing self-employed

Volume lenders simply reject these borrowers without taking the time to consider their individual story, circumstances and needs.

Many write their criteria so as to completely bypass the newly self-employed on the basis that it’s just not cost effective to underwrite the case at the rates they’re having to charge to stay competitive and not lose market share.

This is a sensible commercial decision but it has the knock-on effect of cutting out large numbers of perfectly responsible, credit worthy borrowers from the market, even where they can easily afford their repayments.

And this, at a time when self-employment is becoming increasingly common in Britain.

‘Cannot afford to forget them’

Companies such as Uber, Deliveroo and Just Eat have grown staggeringly quickly in recent years. Professional and financial services firms, squeezed following the financial crisis, made mass redundancies, spawning thousands of new independent consultants working for themselves.

The ageing population and pressure on the ability of both individuals and the state to generate sufficient pension income not only means retiring later, it has also led to a rise in the number of older homeowners working part-time and for themselves later into life.

The Office for National Statistics found that the self-employed made up 15.1 per cent of the UK labour force in 2017 – a total of 4.8m people.

The number of women opting for self-employment is also rising – between 2000 and 2017 the number of self-employed women in the UK jumped 77 per cent.

According to trade body The Association of Independent Professionals and the Self-Employed (IPSE), there are currently 594,000 self-employed working mothers – making up one in seven self-employed people in the UK.

It is critical that, as a market, we do not fail to cater for these borrowers as well as the bog-standard two income, low loan-to-value (LTV), retirement 20 years away borrowers.

This is a growing contingent in society and one we cannot afford to forget.

The new range consists of two- and five–year fixed rate mortgages, each with a fees free option, starting at 2.74% and 3.39% respectively.

Loans are available up to 90% loan to value (LTV) with a maximum term across the range of 40 years and are available in England, Scotland and Wales.

The new range requires a minimum of 12 months trading accounts for self-employed borrowers.

It will consider up to 100% of more complex employed income, including second jobs, shift allowance, zero-hours contracts, bonus, overtime and commission, where it is proven to have been consistent and is sustainable.

Unlimited family gifted deposits or equity as well as Help to Buy applications are also acceptable.

Borrowers outside high street criteria

Managing director Simon Read (pictured) said the new specialist prime range is designed for the many borrowers who fall just outside of the criteria set by high street and credit scoring lenders.

He added: “This can simply be because they are self-employed, recently employed, a first-time buyer, have a low credit score, have a very small credit blemish, or are financing an unusual property. Whatever their circumstances, we can offer a more flexible approach to help clients who don’t fit the mould.

“We understand the frustrations that intermediaries face when finding a suitable solution for clients who fall just outside of the criteria set by high street and credit scoring lenders but are very capable of managing and affording a mortgage on their dream home.

“We don’t credit score and our bespoke approach to manual underwriting is exactly that – adapted to each individual circumstance.”

Yesterday, Magellan reduced the majority of its fixed rates on residential mortgages as well as standard administration and valuation fees by up to 50% for applications received by the end of January.

However, they noted that if lenders wanted to be competitive in the market they needed to be visible to brokers about their proposition.

Secure Trust Bank (STB) announced yesterday that it could not see any end to the competition and pressure within the mortgage market and so was considering ceasing new lending “until conditions become more favourable”.

In its last interim report, published in August, Secure Trust said it had completed £37.3m total lending from its launch in 2017 to the end of June 2018, with £21.3m in first six months of 2018.

Chief executive officer Paul Lynam was pleased with the results at the time, but warned about the highly competitive market although he did expect it to ease.

“The mortgage market is exhibiting significant competitive pressures, with lenders increasingly competing on price and risk appetite to drive new business volumes,” he said.

“We are being careful to avoid being sucked into a race to the bottom and are tempering the growth of this part of the business at this time.”

He added: “I continue to expect that following the closure of the Term Funding Scheme in February 2018 we will see pricing pressures ease which will allow us to compete more effectively.”

Secure Trust Bank confirmed to Specialist Lending Solutions that the consultation was impacting 27 members of staff, although it hoped to mitigate the number of compulsory redundancies with internal positions.

Following the news of business development manager Fran Green joining Shawbrook Bank the lender also noted that staff were free to move if they felt it was best for them.

Pro-active and visible

City Mortgage Solutions managing director Paul Clark agreed that the complex market was competitive at the moment but much of this was around the criteria on offer, rather than rate.

Clark admitted that although his firm had used more than 40 lenders in the last year, they had not used Secure Trust Bank.

He noted that most challenger banks were being very pro-active in contacting brokers about their proposition and criteria.

“It’s gone way past rate or price, most rates in this complex sector are sub 2.5% anyway, it’s criteria and awareness of criteria,” he said.

“The biggest hurdle is making themselves heard enough, but some lenders are very much out there.

“I don’t think STB were making themselves very obvious and if you can’t engage with enough people it doesn’t matter how good your rate is because no-one knows.

“So they have to weigh up being out there and being vocal,” he added.

New lenders still coming

Brightstar chief executive officer Rob Jupp added that it seemed apparent Secure Trust Bank did not have the appetite to get caught up in the competitive market.

And while he admitted it was not good news, he was largely calm about concerns other lenders may follow in closing operations.

“We have to be careful that there’s not a sense of contagion here and it gets a bit out of control,” he said.

“STB was all about lack of appetite to continue the mortgage part of their business because they just felt they couldn’t make the margin.”

He added: “The number of new lenders coming into this space, particularly buy to let, far outweighs those who are stopping lending permanently or temporarily.

“So the net effect is still a positive move in terms of new lenders and that’s really key because if we saw something more deep-rooted and structural that wouldn’t happen.

“In 2008-09 that didn’t happen – we didn’t have any new lenders coming through, while there are a number of them now.”

The move goes into effect today and is open for all brokers but does not include Magellan’s newly launched buy-to-let or Help to Buy offerings.

It does include standard new build purchases however.

The lender said its proposition includes products for a wide variety of borrowers, including self-employed, first-time buyers, complex incomes, and those with impaired credit profiles.

Magellan will accept up to four applicants along with family gifted deposits and gifted equity, in addition to builder gifted deposits/incentives of up to maximum 5%.

Offers are valid for 120 days on existing properties and 180 days on new build.

Lack of complex borrowers

Magellan managing director Simon Read said the lender was delighted to extend its range into Scotland.

“Brokers tell us that there is a distinct lack of choice for complex borrowers in Scotland who need individually tailored mortgages,” he said.

“Our expertise in manual underwriting enables us to look behind the numbers and evaluate someone’s real life circumstances, providing an answer that may not be available elsewhere.”

Read added that to support broker relations and case handling a new team of account managers had been created while the underwriting team had trebled in size.

Nathan Ellis-Calcott, director of specialist lending at Glasgow-based broker Your Mortgage Expert welcomed the move noting that Scotland has been underserved for specialist residential lending options.

“We have been crying out for more lenders who use a common sense approach to underwriting, especially for those borrowers who don’t fit strict high street lending criteria,” he said.

“With the flexible near prime product range and the unique credit repair products, I look forward to working with Magellan to help get more Scottish customers into their dream home.”

The lender said this will include borrowers with complex income structures including self-employed with just one year’s accounts, first-time buyers with no income multiples and those with historic credit impairment.

It is going live to the three versions of the scheme across England, Wales and London.

Rates start from 2.99% with a fees assisted option on all two-year and three-year fixed mortgages, offering no application fee, no valuation fee and a £450 cashback on completion.

Mortgage offers will be valid for up to six months and proc fees will be paid on exchange of contracts.

Sector needs innovation

Primis and PTFS proposition director Vikki Jefferies said the network welcomed Magellan’s entry into the Help to Buy market.

“As a sector that will benefit greatly from innovation and development, Magellan is a great fit to bridge the numerous gaps, particularly when it comes to those customers with more complex circumstances who don’t qualify for traditional high street products,” she said.

Paul Gray, director at new build specialist broker 313 Financial added: “This is great news particularly for first-time buyer, self-employed and credit impaired clients in a new build oriented environment.”

Magellan Homeloans sales director Jason Neale (pictured) said he believed the offer would add value to brokers and their Help to Buy clients.

“I’m delighted that we can offer our expertise and extensive product range to Help to Buy borrowers who may have struggled previously to find a lender who could meet their complex needs,” he added.

Growth goals

The Help to Buy launch is the latest in a series of expansions for Magellan as it seeks to grow its business.

Last month it entered the complex buy-to-let market while in August it completed a securitisation.

This year has also been a busy one for the Help to Buy market, with Accord, Bluestone, NatWest, Precise and 3MC, Loughborough Building Society, Principality Building Society and Platform all entering the market or significantly expanding their proposition.

Ask five different brokers or lenders for their definition of complex income and you are likely to receive a whole range of different answers.

So, rather than offer our own definition, it might be useful to demonstrate complex income in action.

Here are three different examples of real-life cases from clients working in the same profession, all of whom have had complex income circumstances that required an underwriter to assess their affordability and the sustainability of their income.

The self-employed solicitor

Hannah, a successful solicitor, ran her own department in the same law firm for more than four years, before starting her own firm where she was able to take her clients with her.

As well as starting a business, Hannah was also going through a divorce and consequently she wanted to buy a new home just three months into her new venture.

On the surface, this situation appears complex but, to an experienced underwriter, the only difference to Hannah’s day was the firm she was working for as she had the same job and same clients as well as the potential to earn a better income.

This gave the underwriter the comfort to base Hannah’s new income on an accountant’s confirmation of the previous billing of the migrating clients and the likelihood of this continuing given their track record together.

The successful solicitor borrowing beyond retirement

Brian was a 70-year senior partner at a firm of solicitors who wanted to buy a home in the Lake District as he neared retirement.

He planned to work until 85 and wanted a 15-year term.

His application also included a significant amount of commission income as his firm remunerated its partners based on performance.

Given the nature of his profession an underwriter could consider working to 85 as a plausible option and there was also evidence that he had sufficient, stable income should he decide to retire earlier than anticipated.

The solicitor paid by the hour

Luke earned an hourly rate, which is not uncommon for a solicitor, of £250 per hour. He wanted a pound for pound remortgage.

Underwriters were able to consider his income on the basis of a day rate contractor, establishing a daily rate x 5 and then x 46 to give an annual income.

These three examples demonstrate that, even in the same profession, different stages of different clients’ careers can present different complexities for a lender to consider.

They must strike a balance between the borrower’s requirements and maintaining a responsible and sustainable approach to lending.