On the case

Client A wants to remortgage his main residence and then look at his two buy-to-let properties with a view to re-financing these. He got in financial problems in the last year when an unexpected tax bill had to be paid. He managed to avoid court proceedings but has some arrears on his residential and buy to let mortgages.

The Case
Client A wants to remortgage his main residence and then look at his two buy-to-let properties with a view to re-financing these. He got in financial problems in the last year when an unexpected tax bill had to be paid. He managed to avoid court proceedings but has some arrears on his residential and buy to let mortgages.

What the broker says:
Ian Fitzgerald, mortgage broker, Thinc Group

Many clients who approach me are not aware that missing payments on their mortgage will affect their credit rating and their ability to arrange alternative finance. This shows how important it is for clients in this situation to consult a professional adviser. The extent of their arrears and their credit record in general will be the first factor that needs to be determined as this will dictate which lenders are approached. I would first of all advise the client to get their own credit report and ask for their permission to view this. The cost of this can be as little as £5.99 through companies such as Equifax or Experian. It will detail the exact state of the client’s finances, including details of all missed payments, arrears, County Court judgements and defaults on all their borrowing accounts. In this case, the report revealed the client had missed seven payments in the last year on his residential mortgage, but the mortgage company had not registered any default against him. I then requested a detailed mortgage statement from the client, and this revealed that he had made up these payments by the end of the year to bring the account back up to date. The client had mistakenly thought that this would be ok and did not realise the implications. The next step was to identify lenders which would accept arrears in the last year and approach them with the case. This ruled out most of the prime lenders, even though some are now offering a sub-prime range. Five lenders would accept the scenario and I approached the lender that offered the best rate initially. The mortgage proceeded very smoothly from here as the groundwork had been thoroughly completed. The result was that I managed to save the client over £250 per month on his mortgage payment.

What the network says
Alex Murray, group director of mortgages, Thinc Group

This scenario shows exactly why the financial Services Authority is taking such an interest in sub-prime mortgages. It correctly views sub-prime clients as “vulnerable” and it is vital that they are treated very carefully and that we demonstrate the advice given was suitable and improved their situation. As a network it is vital we give a range of lending solutions to suit all circumstances, and also the procedures to source the best scheme for any scenario that a network member may encounter. The sub-prime market for mortgages is a growing sector and many of the high street lenders which traditionally would not pursue this type of customer are now developing products to attract this type of business. This means brokers must have the sourcing tools to aid their experience in matching the client’s circumstances to the correct product. This case shows how increasingly difficult this can be as many lenders will consider different criteria and have different categories of adverse product. We are now seeing a plethora of new categories appear which carry different definitions and we have to ensure our network members and brokers have this information to hand through clear lender and packager communications. More clients are experiencing credit problems, even if only temporary, so we have to ensure we respond and demonstrate our commitment to them both in the short and the long term. Credit problems can be repaired quickly so a yearly review should be carried out as better rates may be available.