It’s frustrating when your client just slips out of mainstream lending criteria. They’re almost a prime borrower but for that one issue – maybe a missed phone bill, the financial fallout of a divorce or just an unusual scenario.
These clients are numerous and the ones most in need of a good broker. They might be surprised to find they don’t have their choice of headline rates. They see the rationale in what they want to achieve, so can’t understand why the big lenders can’t. But what was acceptable to high street banks pre-MMR and MCD isn’t necessarily so today, and high street lending has become increasingly automated in process and decision making.
So how do you help these clients?
Specialist lenders
The specialist sector continues to offer a diverse range of options to borrowers who fall out of mainstream criteria for any number of reasons.
And while it provides an essential service, your client might pay a premium with a specialist lender – perhaps a higher interest rate, or product fee. As these lenders service what some would consider riskier borrowers, they have to reflect that in pricing.
You may also face resistance from your client if they expected a mortgage from a household name. You may know the specialist lender, but some clients will be wary of taking out a mortgage with a brand they don’t know.
If that’s the case, smaller building societies could be the answer.
Mutual appreciation
Building societies have been helping people buy homes for over 200 years, and there’s no doubt they’re trusted by borrowers.
Even the smallest societies have branches, a heartland and a proud history of helping homebuyers and communities. You may find your client more amenable to taking out a mortgage with a mutual.
More importantly, smaller building societies are thriving in the near prime mortgage market as well as in more niche sectors, such as self-build and RIOs to name but two.
When it comes to underwriting, their small size can be an advantage because genuinely bespoke lending decisions can be made. If needed, I can take a case to the leadership team for approval because it makes sense, for example. Vernon’s whole mortgage team is based in one office which makes it easy to discuss our cases and have face-to-face conversations about them.
A small building society may be more likely to approve your client’s application than a big bank because they are willing to spend more time looking into the background of the case. It might take a little longer, but the result is that you can get a mainstream rate and fee with a building society.
Non-standard lending
For your clients with non-standard requirements, don’t forget that smaller mutuals have some of the most innovative products out there.
Later life lending? No problem.
Joint borrower single title? Check.
Retirement interest-only mortgage? We’ve got six options including offset.
And that’s just the Vernon!
Building societies up and down the country are thriving in the specialist lending sector, designing flexible and forward-thinking products and taking a common-sense and individual approach to underwriting.
Maybe it’s time to take a closer look at mutuals.
Tom Gurrie is intermediary sales manager at the Vernon Building Society