"At the far end of that specific lending line might be those borrowers who feel they can’t even remortgage at present due to their circumstances having changed"
For many existing residential borrowers – and indeed those who are trying to get on the property ladder for the very first time – the last 12 months or so will feel very different to what the previous decade might have felt like.
All borrowers, regardless of their personal and financial circumstances, are likely to have benefited from the incredibly low interest rate environment we had in the UK.
Indeed, up until the summer of last year, we were all still feeling some of the benefits of that with swap rates hovering around the 2% mark and therefore product pricing was significantly lower than what we have now.
We know that rates were on the rise as tackling inflation became more of a priority, however this was severely hastened by the ‘Mini Budget’ and its impact, which pushed us all into a very different new interest rate ‘normal’.
Almost a year on from that, we remain in a very changeable rate/product environment and, certainly for existing borrowers – and their advisers – this will have presented some significant challenges to overcome, not least securing a remortgage/PT with rates likely to be very different to the last deal.
For some borrowers, the issues do not begin and end there, because clearly there are affordability criteria to meet, and between their last mortgage and now there might well have been some financial/credit issues, which would be taken into account for the first time.
Lest we forget, in between the last mortgage and now, many borrowers will have gone through the pandemic/lockdown, plus we continue to work through a very tough cost of living crisis that might also have seen borrowers rely more on credit cards or other forms of debt, plus might have seen them miss certain payments for the first time, for example.
This is after all why we have a specialist residential lending space and why Foundation are active within this.
At the far end of that specific lending line might be those borrowers who feel they can’t even remortgage at present due to their circumstances having changed, debt they might have accrued, payments they may have missed at some stage.
For what it’s worth, it is often not as bad as some believe but I was interested by research from Uswitch.com recently which looked at a number of UK industries and the chances of individuals working within those sectors, and who might be up to date with payments, still not being in a position to switch mortgages.
Interestingly, it is within sectors such as arts and culture, travel and transport, HR, manufacturing and utilities where individuals are most likely to be facing this predicament. While legal, education, sales/media/marketing, architecture/engineering/building, where this is less likely.
But perhaps what this shows most is there is likely to be a wide array of borrowers who might once have ‘qualified’ for a vanilla mortgage via the major high-street banks who, for whatever reason, are now not able to currently go back to that particular lending well, at least not this time.
Clearly, rising interest rates plays a part here, but changes to income, a lower credit score than anticipated, etc, can also have a major impact, particularly if those financial issues have happened relatively recently.
These facts and these changed circumstances for individual borrowers are some of the reasons why we broadened our borrower lending tiers earlier this year, including a new F4 tier for the first time. This means we can accept a wider range of borrowers from those who just miss out on the mainstream, to those with recent credit blips, to those who have experienced credit problems in the last 12 months, and those who have no significant adverse during the last six months.
I think it’s possible to see now just how broad the ‘specialist residential’ space is and the above doesn’t necessarily cover it all anyway, because there are also a growing number of borrowers who, for example, have multiple sources of income, want to buy with friends, are recently self-employed, are Professionals at the start of their career, or are individuals with a high commission income, the list goes on.
What we as an industry need to understand is that these individuals continue to need mortgage finance, and they need quality advice to point them in the right direction towards specialist lenders, because the other likelihood is they simply won’t be aware the sector even exists, let alone how they might access it.
Their need is great, their number is growing, and it is advisers who are in the prime position to be able to soothe their concerns and meet their mortgage finance needs.
