Time stops for no one, and neither does the possibility of change. What might seem like an irrecoverable position always has the potential to shift and develop, and for a more positive outcome to be achieved.
There will be thousands upon thousands of borrowers who currently feel like this and require the services of an adviser to help move them to where they need to be.
Within the mortgage market, indeed within the UK economy as a whole, we have recent evidence and precedents to show just how swiftly change can happen. A year ago we were all struggling to come to terms with the post-‘Mini Budget’ period, two years ago Bank Base Rate was at a historical low of 0.25%, three years ago while we were in the midst of the Covid pandemic the mortgage and property market was undergoing something of a boom – I could go on.
The shift over that period has been sizeable by any measure, and it’s a completely obvious statement to make, but we are in a very different environment then we were just 18 months ago, let alone what took place prior to that.
What I’m saying is that as the ‘world’ has changed for all mortgage market stakeholders, so it is the same for homeowners and in response we need to be flexible, to move and respond, to tailor our propositions both to what is happening in the marketplace, but also what is happening to borrowers.
This is not a point that is specific to, for example, residential or buy-to-let borrowers but certainly in the residential mortgage space, there has needed to be a considerable focus on borrowers’ needs in light of the greater potential for changed individual circumstances, but also clearly in respect of what has happened to interest rates.
This is not to say they have necessarily missed mortgage or credit card payments over that period, or that they are currently in arrears, or that they have no way of meeting affordability criteria in a new interest rate environment.
But, what it might mean is that the nature of their income source has changed – perhaps their jobs have changed, perhaps they have taken other jobs in order to make ends meet, perhaps that income is prone to greater levels of fluctuation in any given month?
Specialist lending has also evolved to keep up with this need, and mortgage advisers know the area in which to maintain their expertise is where lenders can support with the cases of layered complexity – where multiple varied income streams may also be combined with a low credit score or the impact of the increased cost of living, utility bills and the cost of debt.
Of course, there could have been more fundamental changes in employment during that period, and again this might impact on their income, and the sources it now comes from. Perhaps during Covid, they were made redundant, perhaps they decided to set up their own business – we know that there has been a significant increase in the number of new businesses set up since that first lockdown – perhaps they went freelance or became a contractor.
All this may well have happened during the course of their last mortgage and now might be the period where they are looking to remortgage. When you add these changed circumstances to the wider economic environment, particularly interest rates which may well be very different from last time they secured finance, you can understand why there might be a greater need for a specialist residential mortgage solution.
Of course, there is good news here in terms of the level of specialist product choice for individuals who are in a changed position, and who might previously have been a mainstream borrower, but now find themselves just missing out on the mainstream for a whole host of potential reasons.
Now, for some borrowers this might seem like a troubling situation, but advisers will know that they can manage the client through this process, and it does not necessarily mean they will never be able to secure a mainstream product in future. Far from it.
What we can do as a lender operating in this space, is make that process as easy as possible for both the adviser and the client, take a manual approach to underwriting which takes their individual circumstances into account and does not simply rely on a tick-box credit score approach that they cannot pass. That way we can all work together to ensure they have the best product available to take them through the next stage of their mortgage.
These borrowers still have every right to an excellent mortgage or remortgage experience, from a lender who has the level of expertise that allows them to take a risk-based approach to underwriting, for example, not normally needing bank statements, and ideally, with access to pragmatic affordability calculations and cost-effective remortgage solutions.
There is always a lot of change to deal with anyway, so it’s up to us to make sure we get the right outcome for those clients who have seen their circumstances shift in recent years, but even though this is the case, they should still be able access the mortgage finance they need, even if this time it is not through mainstream means.
Grant Hendry is director of sales at Foundation Home Loans