"The regional building society sector can often support niche areas of lending, at a lower risk and therefore lower cost than specialist lenders. This allows them to easily bridge the gap between high street and specialist."
The mortgage market remains turbulent, with increased competition and pressures on borrower spending.
Over recent years, we’ve seen interest rates and inflation rise, impacting both lenders and borrowers alike.
Although we are now heading towards a more positive outlook, including some initial reductions in Bank Rate, it’s important to remember the effect the past 24 months or so may have had on borrowers’ credit profiles.
Based on this alone, a wider number of borrowers could be more likely to require a personalised approach to their mortgage applications.
Many will instinctively jump straight from the high street to a specialist lender. However, regional building societies like the Tipton are particularly well suited to meet the needs of clients who fall between these two types of lenders.
All lenders have a role to play, with the high street working to support the majority of the market in achieving lower interest rates at speed, and specialist lenders providing options to borrowers who don’t fit inside the standard box.
Carrying characteristics of both, the regional building society sector can often support niche areas of lending, at a lower risk and therefore lower cost than specialist lenders. This allows them to easily bridge the gap between high street and specialist.
Unlike high street lenders, many regional building societies do not operate computer-based decision-making systems giving a yes or no answer based on a borrower’s credit score. Instead, they can offer greater flexibility through manual underwriting processes, where cases are assessed on the strength of the overall covenant.
It may mean asking a few more questions, however the personalised manner of underwriting allows for each application to be assessed on its individual merits, and this could prove imperative for borrowers who need a common-sense approach.
Manual underwriting allows societies to take a view on the personal situation of each borrower and assess risk on a personalised basis, giving much more potential to support those who have seen a change in circumstances because of the challenging environment we have all found ourselves in.
While this is a service specialist lenders can provide, the middle ground occupied by regional building societies will likely mean terms are more favourable due to the reduced level of risk accepted.
Regional building societies are also known for their niche criteria and mortgage propositions, from zero hour contracts to clients working within probationary periods, or specific self-employed applicant criteria. This approach is likely to prove valuable for borrowers who don’t have a standard contract of employment or may have recently sought out new career opportunities.
How can this support borrowers? Further interest rate decreases are seemingly on the horizon, so it will be important for advisers and lenders to work together to understand the changing needs of customers and provide lending solutions to support them.
With all lenders playing a role in the market, brokers should look before they leap as building societies are ready and waiting to bridge the gap between high street and specialist lenders.
