There is no one lender for every borrower in today’s working world
In the past 20 years, the mortgage market has changed almost beyond recognition. Back in the day, mainstream was the norm and mortgages were granted on three times income or 2.5 times joint income. That was it. As a broker, you checked Moneyfacts or the national papers for the top rates and if your client didn’t fit, they wouldn’t get a mortgage.
But it seemed, maybe just with the blurred vision of hindsight, that there were fewer people outside of these parameters. Maybe people didn’t even look for a mortgage then if they had a CCJ or more unusual circumstances, so mortgage advisers came across such people less often, or maybe there were just fewer unusual circumstances in the first place.
Now it is a completely different market. In fact, it would be interesting to find out how many people a mortgage broker sees in a month who actually fit the mould of 20 years ago. Even if you’re a mainstream borrower, the market is so much more complex: you have non-standard construction buildings for a start, but not every lender will lend on those, so what do you do?
I meet many older brokers, almost all of whom tell me that they have been doing the job for such a long time, they know the criteria in their heads. I know some people have phenomenal memories but it would be interesting to know just how many criteria outside of the mainstream banks someone can remember.
Take the self-employed; this has been an economic phenomenon over the past 10 years, with 15.1 per cent of the UK labour force, or 4.8 million people, self-employed in 2017.
The UK has now overtaken the trend set by the US, where only 10.9 per cent of the workforce is made up of people who have rejected ‘traditional’ employment and chosen to go it alone, by setting up their own business, going freelance or using the gig economy.
Take the latter; did this even exist before five years ago?
For those still employed, even that is no longer always straightforward. We now hear so much about non-standard employment contracts such as the zero-hours phenomenon.
All of this makes life very difficult for lenders, let alone brokers. Just how does an underwriter decide if someone is a good risk or not? How does a lender know if they are lending to a self-employed person who is going to be running the next multi-million-pound business or one of the many that will be out of business in under three years?
In some ways, it is harder for the larger lenders as they need more of a tick-box system on what they will accept or reject, as the volumes they receive are so much larger.
Such automation – as we all know – means they can offer lower rates in return for higher volumes, but it can rarely cope with those cases that are outside of ‘vanilla’.
Step up to the plate all the niche and specialist lenders. If borrowers’ circumstances had not become so much more complicated of late, there would be no need for the plethora of new lenders that have been setting up every year.
The fact is, these lenders have been doing so well precisely because borrowers’ circumstances are now so much more complex than they once were.
There is no one lender that is prepared to lend to every single borrower, and neither should there be.
Our specialists are creative and innovative. They provide a fantastic service because each one deals with a different, often much-needed, niche. And the borrowers themselves are often by no means specialist; it is just the new norm.
Now we just have to find the right lender for each of those clients because every one of them is special, rather than specialist.
While some lenders are good at hitting the press so that brokers know about them, others are so much more under the radar. So how is it even possible for a broker to know every lender that is available, let alone the specific niche and criteria that they specialise in?
The need for a criteria search system has never been more vital than it is right now, and the need to be able to search for lenders by criteria – and be able to show evidence of these searches – is only going to get more important.
Especially as brokers increasingly need to evidence why they haven’t recommended the rate at the top of the best-buy tables to their client who is in receipt of child benefit, on a zero-hours contract and who lives in a fifth-floor flat.
Nicola Firth is chief executive of Knowledge Bank