However, this is with the consideration that an applicant has been furloughed or seen a change in income before the case is submitted, rather than this unexpectedly happening as it is in progress.
So this week, Mortgage Solutions is asking: Has it become more common to see client circumstances change partway through an application? How much does this disrupt the application process, if at all?
I have not seen situations where clients are willing to put down more money even if they’ve built up cash over time due to delays and the stamp duty holiday extension.
I think people are still being conservative and will hold those funds back.
We’ve had a few applications where people have lost their jobs or seen a drop in income partway through, which then means the case cannot proceed or we have to re-house it.
We are finding this means there is more work involved for us as advisers.
Another thing we’ve noticed very recently is on the self-employed accounts, because we’re technically a year on from the start of the pandemic, the difference between this year and last year’s income is black and white.
When lenders are assessing this, it becomes a problem even if this year’s income so far has gone up or is expected to.
Those people who were pretty much locked down last year are no longer in a position to apply for a mortgage as the accounts aren’t showing what the real income is and we won’t see that until next year’s accounts.
If a case goes outside the 18-month window in the middle of an application, lenders will say they need last year’s accounts again. This means the figures we would have put in are now dormant and we need new accounts, but unfortunately, they don’t always show any recovery.
I think lenders should also be taking projections into consideration.
We have a few live examples.
We have a couple of first-time buyers purchasing a shared ownership property with five people in the chain and there has been a breakdown in communication somewhere along the chain.
That was slowing down the process and it had been lingering on for five months. Because of this my clients have pulled out of that particular purchase and are looking for a new shared ownership property.
We will use the same lender, but it will be subject to valuation, payslips and everything else.
Another live example was where a client was buying a buy–to–let property, the surveyor went out to value it and found out the EPC was not of E to A standard.
So that fell out of bed and the client has had to look for a new property to purchase. This has meant a new application along with full underwriting. It is more about the subject of security rather than the applicant, but it does slow down the process quite considerably.
The properties in both cases are of a similar value so it is not a huge change and the amounts each client has put in stayed the same.
Although these have slowed things down in terms of starting applications again, I’m giving lenders the benefit of the doubt and not expecting it to cause too much extra delay.
Underwriters are extending their working patterns and giving us day one lists of what they need, so we know exactly what documents to provide and that is speeding things along.
Perhaps we have just been lucky, but we rarely see changes mid-application, and this hasn’t risen lately.
However, when that does happen, it is always the trigger to go back to square one and start again – is your original recommendation still suitable, for example, someone wants to start a new job on a similar income, and if so, are any changes within the lenders policy you have placed the case with?
If so, carry on as you were, if not, you may have to go to a new lender. In this instance, you may only look at a few days delay while the case is re-approved.
If there has been a ‘material change’ such as – someone leaving or losing a job, a couple becoming pregnant or warning signs that a self-employed client’s income isn’t sustainable – you have to revisit the viability of the recommendation and decide if you carry on with the lender, or to carry on at all.
This will always be the most significant disruption as it could lead to the application being cancelled by you.
We are required to tell a lender any of this anyway, the bigger issue is that we have a moral obligation to our clients to ensure they don’t take on a commitment they can’t afford.
I personally have never wanted a client knocking on my door after being repossessed on a mortgage due to issues I was aware of. That has never happened, and I hope it never does.