A recent industry wide survey by the Intermediary Mortgage Lenders Association (IMLA) demonstrates that Express Mortgages is one of the top performing brokers within the UK. On average, a Mortgage Broker will complete 69% of all applications they submit on behalf of their clients. Of course many brokers complete an even lower percentage of applications, Express Mortgages however had a completion rate of 83% in quarter 4 of 2015.
IMLA concludes that the best brokers are, “evidently highly effective at matching borrowers with the product best suited to their needs, and we expect them to build upon this success as they continue to get to grips with adjustments to the regulatory regime”.
READ MORE about the significant difference a good Mortgage Broker makes in today’s financial landscapeThe mortgage landscape has changed dramatically since 2008 both for Buy to Let and Residential applications. The process for applying for a mortgage used to be relatively simple and the outcome saw applicants rarely refused. Yet, following the banking crisis, many lenders were accused of granting mortgages inappropriately so the wheels of change were set in motion.
The Financial Conduct Authority (FCA) launched the Mortgage Market Review (MMR) which led to recommendations being finally implemented in April 2014. This caused lenders to radically change their approach when granting mortgages. Now for all regulated mortgages, lender’s advisers must hold recognised professional qualifications which has led to the unfortunate state of affairs where most high street banks/building societies cannot see potential mortgage customers for 2-3 weeks for an appointment. And then, the customer is asked to set aside around 2 hours to complete the mortgage assessment process.
After all this, the lender may decline the application leaving the customer to start the process all over again with another lender.
Whilst this is all time consuming, the biggest impact of the MMR implementation is seen in how lenders now judge mortgages as being affordable or not. This measure used to be a simple multiple of income, but the result was tens of thousands of high risk mortgages were granted to those with little or no deposit and poor credit ratings. So now each lender has devised their own mortgage affordability model/s for applicants.
Each lender assesses affordability differently, though they all use a set of common principles. The focus now is not on income, but on modelling an applicant’s expenditure, lifestyle, and any debt. The list of expenses provided by an applicant is now verified by the lender from a detailed inspection of bank statement outgoings and credit checks.
This means that not only costs like childcare will be taken into account, but also any other regular payments; pay TV subscriptions, online gambling account payments and so on. It is true that the more regular spending commitments an applicant has, the smaller the amount a lender will offer for borrowing.
Then, as if this these tests are not strenuous enough, the lender stress tests the remaining income amount, by running it through another model where interest rates rise and the monthly mortgage payment follows suit.
The bottom line means that for mortgage applicants, the complexity of the process is often overwhelming and it is impossible for them to know which lenders are presently ‘more flexible’ in their lending criteria and thus more likely to grant a mortgage. This is where the day-to-day experience and knowledge of the Mortgage Broker becomes an important factor in saving a mortgage applicant time and money.