BestAdvice fires the questions at Tom Denman-Molloy, intermediary sales manager at Mansfield Building Society
BestAdvice (BA): What can a regional building society offer brokers that they may not be able to get from high street lenders?
Tom Denman-Molloy (TD-M): I think that where building societies like Mansfield can excel is the ability to manually underwrite. With high street lenders, there is a focus on automating underwriting as much as possible, and that can mean that quality cases fall through the cracks.
That doesn’t happen with Mansfield though. We have a highly experienced underwriting team, but what’s crucial is that they are given the autonomy to dig into each individual case, to really get a sense of the client’s circumstances. It means that we can give a more rounded decision, and that can really make a difference when the case has some sort of perceived complexity involved.
Those apparent complexities – things like income sources, the age of an applicant, or historic credit blips – can be enough for high street lenders to walk away. But the ability to manually underwrite each case means we are far more agile in being able to respond to more complex requirements, and we know that versatility is highly valued by brokers.
BA: Despite a flat property market, affordability continues to be an issue for many homebuyers. What steps can lenders take to maximise affordability for their clients?
TD-M: Again, this is an area where manual underwriting makes a big difference. If you have rigid, automated underwriting then you can end up with quite a narrow impression of an applicant and what they can truly afford.
However, when the underwriting is carried out manually you get a far better sense of true affordability, rather than what the calculator suggests the applicant can afford. Lenders who underwrite in this way are also better able to account for additional income sources, which can make a significant difference to the sums a borrower can access.
Lenders have to be responsible of course, and ensure that applicants can only borrow as much as they can reasonably afford. But it’s undeniable that manual underwriting provides a much more comprehensive impression and means that lenders may be able to go further in offering the support borrowers need.
BA: Total mortgage lending is expected to shrink this year, but are there any sectors you think will grow in the next 12 months?
TD-M: There are a few areas of the market that are likely to expand simply because of the challenges of the last few years, and the way that they have impacted household finances.
For example, the pandemic and the economic situation since means that we are likely to see more customers with adverse credit. Those blips on their credit report may be somewhat distant by the time they look to borrow, but they may be enough for some lenders – particularly those who are very rigid in their approach – to turn away. It’s an area we have seen grow already at Mansfield, which is why we have enhanced our Versatility range, specifically to support borrowers with complex circumstances.
Another area where there is likely to be demand is for debt consolidation. We know that significant numbers of households have temporarily taken on additional credit over the last few years in order to keep their heads afloat, and may want to consolidate those debts by tapping into the equity held within their property.
BA: Product transfers are on the rise and brokers are encouraged to take a more proactive approach with their clients. What questions should they be asking when a client is approaching the due date for their remortgage?
TD-M: I think it’s really important for brokers to get a sense of future plans and any changes to current circumstances. Brokers are perfectly placed to pick their clients’ brains around what they might want to do in the years ahead, particularly if there is likely to be any desire for capital raising.
It may be that they have outstanding unsecured credit and would benefit from debt consolidation, but equally there will be some clients who might want to carry out some form of home improvements in the future, should they be looking at a job change that involves working from home or expanding their family.
Having that information makes it far easier for brokers to help clients access the right product not just for today but for the future too.
BA: With an ageing population, many of whom have outstanding balances on interest only, what options are there for later life lending?
TD-M: We have an ageing population in the UK, and there is still plenty of demand among older borrowers for mortgages, but all too often they can find it difficult in order to secure the funding they need.
It’s an area of the market we have looked at closely at Mansfield, in order to develop a product proposition that best meets the needs of later life borrowers. For example, whilst some older borrowers benefit from remaining on an interest-only mortgage, we have also seen a strong response to our ability to consider cases which are interest-only with downsizing. There is a significant portion of older borrowers who know that they will be downsizing some years down the line, but in the meantime want to borrow, for example to consolidate debts, improve their property or even gift a house deposit to a loved one.
On that topic, it’s worth remembering that many older borrowers are looking for more from their borrowing than simply addressing their own concerns. The bank of mum and dad continues to play a big role within the UK housing market, but the help provided by parents – and for that matter grandparents – can come in many forms, beyond gifting a deposit.
For example, we have seen significant interest in our Family Assist range, where older relatives can use savings or equity in their own property as security on a mortgage for a loved one, as well as the ability to borrow on a joint borrower sole proprietor basis. Ultimately, it’s really important for lenders to get to grips with what matters for older borrowers, and to understand how they can support that cohort more effectively.
BA: Do you think many lenders remain too restrictive regarding the types of property they will accept?
TD-M: It’s a similar issue to affordability underwriting in my view; there are some property types that are an immediate red flag to lenders, and which they won’t consider out of hand.
However, lenders can be a little more versatile if they really get to understand the individual elements of a case, even if it does include an unusual property.
We have seen this first hand at Mansfield, where we recently lent against properties as unusual as windmills and a bungalow with business premises on site. Similarly, we are keen to support the self-build sector, helping would-be homeowners to construct their own dream home.
BA: With Consumer Duty just around the corner, do you have any tips for brokers on how they should approach the advice process?
TD-M: We know that brokers are already incredibly committed to delivering the best possible service to their clients, but Consumer Duty is going to mean changes need to be made.
Brokers of course want to ensure that they are focusing on good customer outcomes and ensuring that the right mortgage is selected for the client’s circumstances, but there will be a greater expectation of being able to demonstrate the research that has gone into that selection. That is going to mean considering a wide range of lenders, as a matter of course, rather than relying on a trusted handful for the bulk of cases.