Self-employed borrowers have been particularly hard hit over the last year, but as lockdown eases, the economy opens up and a new tax year arrives there appears to be light at the end of the tunnel.
So with lenders widening availability for employed customers, is this also happening for your self-employed clients?
Are product availability and criteria improving for self-employed borrowers?
Almost everyone in the country has been or knows someone who has been touched by its health effects while the mortgage industry has lost its own colleagues to Covid.
In addition, the repeated lockdowns and restrictions on movements and daily life are hitting everyone hard. So Mortgage Solutions is asking how its readers are coping now.
The UK’s pandemic is one year in and has hit everyone hard becoming one of the most severe outbreaks in the world. How are you feeling?
Bank of England data shows house purchases were at the same level as last July and anecdotal reports suggest August continued to be busy.
But taking a break from the pressures of work is essential and especially so during this unusual period.
So this week Mortgage Solutions is asking if you managed to fit in some time away from work during the summer?
Did you take a summer holiday this year?
Some 74 per cent said they predicted a shift towards properties near green spaces while 68 per cent believe homes with private, non-communal space will become more desirable.
Lockdown restrictions have been a challenge for everyone, but those without gardens have been forced to spend a hot spring trapped indoors.
So this week, Mortgage Solutions wants to know if you have begun to see a rise in the number of buyers looking for a home with its own garden.
Have you seen a rise in house hunters seeking a home with a garden compared to before the pandemic?
While valuers are keen to emphasise they can only reflect the state of the property and work within lender guidelines, stories such as nil valuations being received for poorly kept neighbouring gardens can prove irksome.
So this week Mortgage Solutions is asking if you have ever challenged a property valuation successfully?
Have you ever been successful when challenging a valuation?
Writing for Mortgage Solutions, Martin Langlands, chief risk officer at Harpenden Building Society, said: “Proving to your supply chain and the regulators that your business can operate seamlessly during an IT meltdown will be the main issue facing financial firms in Q2.”
He added that large and medium organisations already have robust operational plans and many small and medium size enterprises have thought through how they would operate in the event of a disaster.
But with more controls and rules designed to “beef up” this process, all organisations are going to have to apply more due diligence and put in place more controls and contingencies.
So this week, Mortgage Solutions wanted to find out how ready intermediary firms are to cope with a massive system failure.
Is your business operationally resilient in the event of an IT meltdown?
Free legals, the perk offered to remortgage borrowers to make switching to a new deal cheap and easy, are giving mortgage brokers a service headache and causing them reputational damage.
Just over 40 per cent of intermediaries responding to Mortgage Solutions’ latest poll said the change they wanted lenders to implement next year that would have the biggest impact on their clients was better management of the service given by free-legal conveyancers.
Brokers say the term ‘free-legals’ is a misnomer because the process takes so long it costs their client money when their mortgage deal expires and then ends up on a more expensive standard variable rate (SVR) until the remortgage completes. It also costs them more in man power than if the conveyancing work had been paid for.
Colin Chapman, director of Genesis Financial Services, said: “Are free legals really free? Technically yes, but not if you add up the time we spend chasing cases and trying to almost reinvent the wheel to get them over the line to avoid deadlines being missed.”
Chapman describe the free legals package as ‘shocking’. He said there was a lack of communication from the conveyancer, emails and calls went unanswered and firms denied receiving documents that had been securely sent to them but when challenged would ‘miraculously appear’.
He added: “Deadlines have been missed and clients revert to a standard variable rate for reasons that are totally avoidable. The most recent example is where a mortgage deed was rejected the day before completion after sitting in the conveyancer’s office for over six weeks, signed and ready to go.
“The package has to either change so that lenders offer cash back instead of free legals or solicitors need to staff their operations appropriately for the volume of cases they are telling the lender they can handle.”
Richard Campo, managing director of Rose Capital Partners, has experienced free legal problems with his clients and his own mortgage.
Campo said that some of his cases have taken so long to complete that the lender had since dropped their rates. He added that requesting a new mortgage offer with a cheaper product then put the client at the back of the conveyancer’s queue again.
“This very same thing happened to me on my own remortgage last month,” said Campo.
“My mortgage offer was produced at the end of September. A new offer was needed, and produced on the same day of the change by Halifax, so we pushed for completion at the end of November.
“I had no update or even a response to calls, emails or secure messages from me and my team for over a week. That cost me nearly £1,000 as I hit the standard variable rate prompting a very embarrassing conversation with my wife to explain why the ‘expert’ got it wrong. The latter was more painful.”
Campo said he is calling his remortgage clients to warn them of the issues and begin the switching process earlier.
The lenders and legal firms picked out by brokers for offering poor service through free legal packages were NatWest, Virgin Money, Enact and Involegal.
NatWest admitted it had free legal service issues at The Mortgage and Protection Event in Manchester at the beginning of November.
A NatWest spokesperson said: “In recent weeks we have seen a high demand from customers, and are working with all of our partners to ensure that service levels are strong throughout the home buying process.”
Involegal said the contracts that conveyancers had with high street banks were based on the bank’s anticipated work volumes and were not based on a fixed number of cases which made it difficult to anticipate the level of staff that would be needed.
Matthew Tossell, chief executive of Involegal, said: “Like many other firms in the remortgage and conveyancing sector at the moment, we have received case volumes far in excess of a particular lender’s anticipated work volumes in a short space of time. This has put considerable strain on our ability to answer phone calls and emails within our normal service level standards.
“We took the proactive step of pausing instructions from our client over a month ago to ensure we could prioritise the processing of existing cases. However, this has inevitably impacted on our ability to communicate as effectively as we would like with the bank’s customers in the short term and we are sorry for any frustration this has caused.”
Tossell said the firm was “working around the clock” with the lender to deal with the “unprecedented and unexpected volumes” of remortgages in the market. It is also having discussions with banks around managing work volumes in the future.
A spokesperson for Virgin Money said: “We are always looking to improve service levels for customers and we work closely with partners to address any issues which occur. We’ll ensure the issues raised here form part of those discussions.”
Enact did not respond to requests for comment.
A rising number of people are self-employed and growth in specialist lending markets is resulting in mortgages being made available to more people with varying circumstances.
This, however, can be time-consuming for advisers as they try to find a lender that will accept their client.
This week Mortgage Solutions is asking how much time do you dedicate to researching lending criteria?
On average, how much time do you dedicate to researching lending criteria each week?
The latest reader poll by Mortgage Solutions asked: ‘Are lenders doing enough with criteria to accommodate self-employed and contract workers?’
Some 33 per cent responded: ‘No, it’s difficult to place cases’ with a further 38.5 per cent only agreeing that some lenders had it right.
Just 22.9 per cent said there was plenty of choice, while 5.5 per cent of respondents said they did not know.
However, industry commentators were split about whether the responsibility was on lenders or brokers to tackle the situation.
Anita Arch, head of mortgage sales at Saffron Building Society, admitted that self-employed lending could be a “complex area”, adding: “I don’t think many lenders fully understand trading accounts. However, self-employed is a growing segment and you can’t ignore it.”
Chris Sykes, mortgage consultant at Private Finance, said: “The findings of this poll aren’t especially surprising to us, because we can see it from both sides: it’s almost certainly true that placing the cases of self-employed borrowers is more difficult than placing those of the traditionally employed; and its inarguably the case that mainstream lenders could do more to accommodate such borrowers.”
Sykes went on to recognise, however, that with enough knowledge of the specialist lender market, “solutions can be found for the self-employed”.
Carl Shave, director of Just Mortgage Brokers, said that while the results were in part expected, “having a third of respondents indicate that it’s difficult to place cases is perhaps a little surprising”.
He said “much blame” was put onto lenders by some advisers who believed they did not understand self-employed customer’s finances and while some lenders probably do not look beyond tax returns, he said it was “a broker’s role to find the most appropriate lender for their customer’s situation”.
John Yerou, managing director of Freelancer Financials “totally disagreed” with the results adding that despite the current economic and political climate, his company had “never been in a better position to help self-employed clients”.
He said: “Today you can get self-employed people, sole traders and company directors being assessed on just one year’s account, a lot of lenders will accept that it’s just some brokers are not aware.”
Andrew Nicolaides, director of Elite Mortgage Finance, said that although lenders were not all “as flexible as they could be with their criteria”, he was still surprised by the figures, as he “would have expected more brokers to have confirmed there was plenty of choice for self-employed applicants.”
“I guess this is down to the experience of the mortgage broker,” he added: “Brokers need to review lenders criteria and update their knowledge.”
Nicolaides said: “Its all about knowing the lender’s criteria and the experience of the broker dealing with the mortgage which could make the difference in obtaining the mortgage offer or not.”
Yerou echoed this as he suggested the reason for the result of the poll was the majority of brokers would be dealing with the ‘vanilla’ market, not be focusing on or not knowing enough about the self-employed segment.
Yerou added: “If you get a firm that specialises in self-employed or have had good experience dealing with that, they know there are good solutions out there.”
Shave reiterated this, saying: “Knowing your market is paramount to giving best advice. Dare I mention that if it was easy for everyone to arrange a mortgage that perhaps there would not be quite so much demand for a broker’s services.”
As borrowers may find themselves ineligible for a two-year fixed mortgage, it’s not too surprising that the longer product may be suggested as a more suitable option to get them a mortgage while also giving them security for a lengthier term.
So this week Mortgage Solutions is asking are you recommending more five-year fixes over two-year fixes based on affordability calculations?
Are you recommending more five-year fixes over two-year fixes based on affordability?
