Mortgage Advisors are crying out for common-sense approach to affordability

‘How much can I borrow?’ It’s a question that all mortgage advisors will have heard countless times, from all sorts of borrowers; whether they are looking to pick up their first property or take another step up the housing ladder.

To be honest it’s not always an easy question to answer either, given the way that different lenders approach the issue of affordability. In fact, all too often I hear from fellow industry experts who are frustrated at the rigid, impersonal way that some lenders approach assessing what a potential borrower can afford.

Making ends meet

A good example here are those people with less than perfect credit scores. Whilst our way of life may be slowly returning to something approaching normal, even with the current concerns over the latest variant, the reality is that the impact of the pandemic on people’s finances is far from over.

Job losses, reduced hours and furlough have forced lots of borrowers with previously impeccable records to scrape by; potentially missing the odd payment here and there. Unfortunately, those missed payments can play havoc with the borrower’s credit rating, to the point that some lenders, who are perhaps a little over-prescriptive in how they view borrowers with adverse credit - don’t want to deal with them.

This does the borrower a disservice; they may be a perfectly good candidate for a mortgage but have simply been thrown a repayment curveball in the shape of a pandemic.

I strongly feel that by taking a more common-sense approach, and really getting to know the client, rather than focusing on any headline nasties like the fact that they have missed a couple of payments in the last 12 months; lenders can be far better placed not only to assess the application properly but deliver a more informed response.

Helping first-time buyers

It can be a similar story with first-time buyers too. It’s no secret that purchasing a first property has become even tougher over the last year and a half due to the enormous house price growth we have seen across the market.

According to the latest house price index from the Office for National Statistics, house prices have jumped by an average of 10% in the year to November, taking the average to a whopping ￡271,000. In cash terms that’s a jump of ￡25,000 in a 12-month period.

Obviously, price rises of that scale make it a lot more difficult for first-time buyers to build up a deposit on their own, never mind borrowing enough to actually cover the purchase price. This challenge is made somewhat impossible if lenders are particularly rigid when it comes to the credit history of that would-be homebuyer. There will be some potential homeowners who have little to no credit history, but that lack of a record should not on its own make purchasing a property impossible.

I feel that there is an opportunity for lenders to be creative here; for example: accepting guarantors, embracing the potential of joint borrower sole proprietor lending, or simply being open to gifted deposits.

Embracing common sense lending

Where does this come from? Recently reading an article from Mansfield Building Society they went on to explain how they don’t rely on computer systems and algorithms to dictate the cases they will accept, instead they embrace a more manual way of doing things, trusting their underwriters to get to the heart of the case and the borrowers involved.

Their idea came from a sound and reliable source, simply speaking and listening to the feedback they had from brokers and their clients.

I feel that their new ‘humanised’ approach to affordability should be the way forward; by applying a little more common sense when it comes to assessing affordability, lenders can enjoy a far more rounded and accurate picture of the borrower and their circumstances, and in doing so help far more people to achieve their borrowing goals.

If you are looking to assess your mortgage affordability or discuss your options please get in touch with my team on 01634 968 111 or book your appointment online.