People who are refused a mortgage should be made aware of the specialist lenders who could serve them
Last year, almost a million frustrated Britons left their existing bank to join a new one, a figure up 6 per cent year-on-year.
While it is difficult to pin down a reason why for every individual, this could in part be attributed to the number of consumers who have been refused lending by their bank.
According to recent research, four in 10 customers aged 18-24 have been denied a mortgage, and just over a quarter of those aged 25-34 said the same. For the total UK population aged 18-69, this means that one in six adults have had a mortgage application rejected in their lifetime, roughly equivalent to over 10 million customers.
It is easy to see how frustrating this must be. Imagine a 10-year-long customer of a high-street bank walking into their local branch to enquire about securing a mortgage. They may, or may not, have had some financial bumps and a less-than-perfect credit score, but hope their loyalty and long-standing relationship will mean the bank understands the reason behind this. For example, an unexpected illness, accident or divorce – or they just have not had the chance to build their score.
However, when asked to show their financial credentials which then do not match up to the bank’s strict criteria, they are rejected and potentially offered little to no alternative of where else to go.
A case of give and take
How is that customer likely to feel? Loyalty is a two-way street and if a customer does not feel like their bank will reciprocate, they may mull over the value of staying.
As an industry we have quite a powerful and measurable impact on the customers we serve. The number of cases we get through our doors is directly linked to the quality of service we provide. If customers are unhappy with the service, it will not only influence their perception of the market, but also hurt our business.
Although the research referenced above included lenders of all types, there are clearly borrowers struggling to access affordable and sensible lending – and a substantial number of these may assume that a high-street lender is their only port of call. What the industry and high-street banks must do is alert these customers to the other avenues that are available to them. This will, in turn, reassure those borrowers struggling to unlock lending that one rejection does not mean the end of their search.
A promising outcome of our Specialist Lending Tracker was that 94 per cent of brokers said they were likely to refer their client to a specialist lender if they had been rejected by a high-street lender. With so many brokers aware that specialist lenders provide a viable alternative, banks should be pointing borrowers in the direction of intermediaries for advice. These referrals could easily lead to an increasing number of positive customer outcomes.
Even if a borrower is initially accepted for a mortgage with a high-street bank, their circumstances are very likely to change through their term. A change of employment, income or any additional debts incurred could affect their ability to pay and if this impacts their credit score, the chances are they will be unable to remortgage with the same lender to a cheaper rate.
With UK household debt now at a record £15,400, according to the Trades Union Congress, it is becoming increasingly likely that more customers will try to refinance with this additional complexity. In this scenario, advisers and specialist lenders are on hand to help navigate any challenges which may follow; and this is where their value really shines through.
Raising customer confidence
The bottom line is that there are lending routes available for complex customers. It is just that we need to see lenders who do reject these types of customers do more to show them the alternative options available – rather than leaving them with a ‘computer says no’ response.
Financial advice has an enormous role to play here. All lenders have a responsibility to their customers and, ultimately, we need to reassure these customers they could secure finance and, in turn, raise the hopes of this sizeable portion of could-be borrowers.
Steve Seal is a director of sales and marketing at Bluestone Mortgages