91% of brokers interviewed and polled for United Trust Bank’s new mortgage white paper – ‘Growing opportunities for brokers in the specialist mortgage market’ – suggested mainstream lenders had tightened their criteria for self-employed applicants.
The findings of the independent survey of over 100 mortgage brokers suggest that customers with ‘complex’ incomes, being either self-employed, sole traders or with multiple income sources is a group which will continue to grow and that having lenders sufficiently skilled-up and with an appetite to cater for these customers is vital. 81% of brokers believe that generally clients’ incomes have become more complex over the last 12 months.
In addition, 88% of mortgage brokers believe that self-employed customers, specifically those who took advantage of legitimate Covid grants are being marginalised by mainstream mortgage lenders.
Brokers indicated that many lenders had struggled to ‘take a view’ on those clients who had used a legitimate government grant and felt they should have been able to apply an objective assessment of the impact that the lockdowns had had on certain, previously successful businesses.
UTB’s white paper confirmed the key factors differentiating ‘mainstream’ from ‘specialist’ cases are around income, credit history, credit score, loan size and property type. However, according to brokers like Matt Arena, managing director of Brilliant Solutions, what sets them apart is the necessity for lenders to involve human decision making rather than apply inflexible automated underwriting. Brokers tended to describe this as a willingness to ‘take a view’.
“The self-employed are the hardest type of borrower to systemise, so it is fair to assume they will continue to form a growing part of the specialist lending sector.”
29% of brokers who took part in the research said that more than half of their cases from the previous 12 months could be described as ‘specialist’ whilst a further 24.5% said between 25% and 50% of their cases had been ‘specialist’. 78% of brokers believe the specialist mortgage market represents a bigger opportunity today than in the past.
Buster Tolfree, director of mortgages – United Trust Bank, who commissioned the white paper, said: “Many applicants no longer fit traditional ‘tick-box’ criteria and that group is only going to get bigger. The way people earn their income or incomes has and will continue to change. As such, income criteria will be an increasingly important factor for brokers when choosing where to place their cases.
“Although many applications will require the skills and judgement of an experienced professional to properly assess suitability, that same knowledge and flexibility can be applied when designing and managing auto-underwriting systems and criteria.
“The idea of being able to ‘take a view’ is more than simply having a human involved. It’s about the approach a lender takes to underwriting and in establishing criteria which recognise that incomes are no longer always singular and straightforward, credit histories aren’t always unblemished and some properties are more unusual than others.
“Automated or part automated application processes using time saving technology do not discriminate against specialist cases per se, as long as the system is designed to accommodate applicants with more complex circumstances. At UTB we have combined technology and pragmatic, flexible underwriting to provide brokers and their customers with an accelerated, straightforward experience. If a human needs to get involved, they will. But not all ‘specialist’ cases require it every time. Forward thinking specialist lenders like UTB are now able to offer the best of both worlds.”
