Nearly every day brings yet another admission from the boss of a ubiquitous high street name that sales have slumped and jobs will be lost.

Debenhams, John Lewis, House of Fraser, Coast, Patisserie Valerie…the list goes on.

Figures from the Centre for Retail Research suggest that job losses on the high street are expected to rise by 20 per cent this year, leaving more than 160,000 people out of a job.

For those who are facing redundancy, it’s a far bigger worry than simply the closure of shops and increasingly ghostly high streets.

Cannot foresee the three Ds

Forgive the gloom, but this raises a really important consideration for both lenders and brokers.

The three Ds – death, divorce and debt – are a reality that all of us have to deal with at some point in our lives, whether directly or through someone we know.

Each of these circumstances can throw off even the best laid financial plans.

The most stringent affordability assessment in the world cannot foresee the breakdown of a marriage in five years’ time or the loss of a job held for the past 20.

How lenders deal with the changes in circumstances for borrowers who must deal with these challenges is fundamental to our responsibility to treat all of our customers fairly.

The Financial Conduct Authority has been assiduous in its encouragement of forbearance and repossessions have been extremely low for more than a decade as a result.

Careful, sensitive underwriting

In the majority of cases where customers lose their jobs, they will find another one and avoid arrears or manage to get their finances back on track after a few months.

But this leaves them in a really disadvantaged position, especially when it comes to getting approved for a mortgage – or, more often, a remortgage.

It requires careful and sensitive underwriting to assess these borrowers’ affordability and it never makes sense to give a borrower a loan they cannot afford to service.

But there are tens of thousands of people in the UK whose credit is inadvertently damaged temporarily who are nevertheless financially responsible.

At Precise Mortgages we require a customer to have been in their job for at least three months and be able to demonstrate a 12-month continuous employment record.

A blip in credit is just that, a blip.

Customers must be aware that there is help out there and brokers are ideally placed to advise as to how they can access that help.

The lender will allow defaults on small utilities, communications and mail order shopping to be ignored on four of its loans.

This is the first time the lender has permitted these events to be disregarded.

Across its mortgage range, it will permit borrowers who have missed payments on fixed term credit agreements to apply six months after the event – it was previously after 12 months.

Pepper has also introduced interest-only repayments method on residential remortgages to 60% loan-to-value (LTV).

It has previously made interest-only available for purchases.

Self-employed additional considerations

The lender will also now permit self-employed borrowers to include additional income considerations as part of its affordability assessment.

These include expenses add-backs, directors’ car allowance, directors’ pension contributions, use of home as office and private health insurance.

And it has cut its minimum age requirement to 21 from 25.

Pepper Money sales director Rob Barnard said: “We are always reviewing our products and pricing to ensure that we can make it as easy as possible for brokers to find a home for their interesting cases.

“Last week we slashed rates on a limited edition range of keenly priced products and today we have enhanced our criteria across a number of key areas. I think this goes some way to show the scale of Pepper’s commitment to brokers and our ambition to help even more borrowers.”

Each could be forgiven for thinking that, despite the tenth anniversary of the credit crisis being this August, it is harder than ever for them to get the mortgage that they need to finance the property they want.

As those who were in the mortgage industry at the time will recall, stage one of the credit crisis began on 9 August 2007 with the news that a number of global investment banks were ceasing activity in hedge funds that specialised in US mortgage debt.

Uncertainty about just how much money individual banks had invested in possibly worthless derivatives quickly spread around the world and banks stopped doing business with each other. This global contagion spread, resulting in the nationalisation of Northern Rock in February 2008, until it came to a crisis point on 15 September 2008 when the US government allowed Lehman Brothers to go bankrupt, putting paid to the idea that banks were too big to fail.

Mortgage lenders failing to react

Since those times of financial crisis, the needs of consumers have been constantly evolving, but the mainstream mortgage industry, with its low appetite for risk, has not kept pace with new demands. Whilst many lenders have recognised the changing profile of today’s borrowers, whose shifting habits and lifestyles mean that they are rejected because of their complex income sources and less than ‘perfect’ credit profiles, they have failed to react.

Over the last few years, the market has seen the re-emergence of specialist lenders focussing on customers who have been neglected by the mainstream. In 2016, specialist lenders advanced a total of £16.7bn against a low of £5bn in 2009, an increase of 19% a year compared to 8% for gross mortgage lending as a whole, according to IMLA. Many of these new brands know their target market segments very well, understand their needs, and can provide innovative products that have been specially designed for these often-disregarded sectors.

For example, several specialist lenders will consider residential mortgage borrowers who fit the following criteria:

• Self-employed: one year’s verified accounts or SA302. Dividends and net profit included
• Borrowers approaching or in retirement: up to 85 years old at the end of the term. Current income used if retirement more than 10 years away. Affordability includes 100% pension income
• Impaired and improving credit history: small or life events allowable
• ‘Buy together’ mortgages: up to four applicants accepted with all incomes considered
• First-time buyers looking to buy with the help of a parent or close relative
• Contractors: six months’ contract or rolling three months renewal at least once. Only one-year track record of employment in the same line of work required.

As a result, specialist lenders are in the perfect position to help change the industry’s view of what makes a “perfect borrower”, a concept that has become increasingly unrealistic in today’s society.

Intermediaries have an important role to play when it comes to educating borrowers about how specialist lenders can help them – but they can’t do it alone. Lenders will need to communicate frequently with brokers to ensure they are informed on the latest innovations and are able to suggest the most appropriate deals for clients.

Perceptions of what makes a good borrower are changing, but more still needs to be done. For their part, borrowers need to be aware of the growing specialist lending market, not least so that they have the confidence to seek out this kind of mortgage advice, knowing that there may be a lender out there able to help them. As the mortgage market continues to evolve, we hope that more customers with blips on their credit records will be able to access the lending solutions they need – and deserve.

The residential mortgage is for slightly more complex borrowers with some previous blips on their credit profile.

The Foundation residential range includes a standard offering for clients with no CCJs or defaults or mortgage arrears within the last two years. Its specialist range is for clients with more recent blips on their credit rating. Both ranges provide a choice of two-year fixed rates.

Both will be distributed through Foundation’s preferred partners, which include L&G Mortgage Club, a packager panel, Paradigm and Intrinsic with its broker panel due to be broadened over time.

Jeff Knight, director of marketing at Foundation Home Loans said the lender is taking the next step in its growth plans.

He said: “It is an exciting time to be part of the team at Foundation as we continue to deliver growth. We have gained a strong reputation within the buy to let market and we want to transfer our straightforward, pragmatic approach to the residential market, targeting a sector in the market that we believe is growing.”

In addition, the lender has rebranded (pictured) to reflect its strategic repositioning within the market. The new branding was unveiled to its staff earlier this month at an all company conference and featured at Mortgage Solutions’ Buy To Let Market Forum.

Knight said: “Our branding had to reflect our market positioning and our new corporate values, that our employees have been part of developing. Our branding has truly been built from within, which is how it should be.”