The mortgage market has been dynamic, challenging, exciting, volatile and rewarding in varying degrees for as long as I can remember. But it does seem that over the last 18 months, it has been all of those things all of the time!
As some form of normality returns and the way in which we all do business becomes clearer, it has also highlighted that client needs (which were always evolving) have had some accelerated change mainly due to the pandemic. The scenarios presented by these clients require a much broader understanding of the spectrum of lenders that intermediaries can use to provide mortgage solutions for their customer.
The Specialist Market
It is certainly true that customers are more likely to have needs now that are unlikely to be satisfied by High Street lenders than at any time in living memory. Whether that relates to income issues due to furlough, unemployment, or reduced hours for those employed applicants, a traditional High Street lender may not be able to service this new generation of needs.
But it’s not just employed customers who would be affected self-employed customers would have also suffered an element of volatility as the pandemic has affected countless businesses up and down the country. Regardless of whether customers are employed, or self-employed, around 29%* of households have had to borrow money over the last 12 months to replace lost income. There is also a higher propensity for clients to look at non-standard properties due to a shortage of housing stock in a quest to home ownership. These are all aspects of criteria that specialist lenders have in their DNA and reasons why intermediaries need to think outside of the High Street when they are making their lender decisions.
Price or Criteria?
The traditional price led sourcing process, at least as a standalone procedure, is far less likely to hit the spot for clients now than it did historically and more and more intermediaries are now using criteria led sourcing before they look at price. ‘Does my client fit’ is box number one for many transactions and having a strong set of filters is vitally important. The first of which should always be your own knowledge of the lender market. The need for independent financial advice plays a far bigger part now more than ever and demonstrates to clients that the process of getting a mortgage is a lot harder than 20 years ago. The expertise & knowledge of an Intermediary is paramount to customers who are about to embark or supplement one of the biggest transactions in their lifetime.
Giving regular time to a high street BDM will tell you little that you didn’t already know. Whereas spending some of your valuable time with a specialist BDM should at least reinforce, if not enlighten, your thoughts on your initial lender filter which you can then progress through specific elements of criteria which ultimately provides you with the lender decision process. A great relationship with a specialist BDM will also help smooth the lending process once an application is made. A specialist lender will almost certainly have a different set of requirements to a high street one and be more likely to have quirks that are different to other specialist lenders…and will also be more likely to be open to an underwriter conversation as cases are likely to be more complex. If you understand what the requirements are and can provide the documentation at the outset you have a much better chance of achieving a positive outcome for you and your client. Cases which are submitted to lenders with all the relevant documentation uploaded right first time, are more likely to go to offer much quicker than those that are missing important information from the outset.
You may be confident in which lenders are happy with Buy to Lets, which are comfortable with Ex-Pats and whose criteria includes SPVs…but what about an Ex-Pat buying a BTL portfolio under an SPV? The case study below shows how this need not be a headache.
Take Victoria for example:
Victoria is a British National, who moved to Australia 19 months ago for work. She retained her UK residence to be able to let it out after obtaining consent to let from her current lender. Having settled down, she is now wanting to buy a property in Australia and use the equity in the UK property to raise a deposit. She is looking to maximise the borrowing available to her. Being an Expat in Australia and wanting to raise monies to buy a property over there has made it difficult to find a lender who will help her with a mortgage.
- Vida verified Victoria is a basic rate taxpayer in the UK by way of the latest SA302 and tax year overview
- The basic rate ICR of 125% was applied maximising borrowing up to 70% LTV
- The underwriter could ascertain 3 active forms of UK credit
- Proof of ID and address certified by an International Law Firm, UK Embassy or Public Notary was obtained Victoria was able to release the funds required to buy a property in Australia
- Vida accepts SPV’s across the whole Buy to Let product range.
Hints and Tips:
- If you have time in your diary for a BDM call, physical or virtual, make it a specialist one
- If you are a multi broker office, split the specialist lenders and have an expert on all the main lenders across the office
- If you are submitting a specialist case, contact Brightstar and talk them through what you are enclosing…Right First Time always wins
- Have you estimated how many of your submissions this year will be specialist ones? Are your processes, relationships, and knowledge levels in line with that?
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Subject to status. Criteria available at the time of publishing and subject to change or withdrawal at any time.
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