Understanding the mortgage market for complex cases

“Intermediaries have a key role to play in understanding the various niche scenarios that a client can present with and the lenders that cater for them.”

The cost of living pressures in recent years have undoubtedly led to an increase in the number of people with complicated financial circumstances.

Factors such as credit issues due to debt or mortgage arrears, more complex income streams from second jobs or contract work, different deposit sources, or simple affordability difficulties due to increased rates, can all impact mortgage applications.

The good news is that the UK mortgage market is adapting to the changing needs of the homebuyer.

Lenders are increasingly adopting a more common sense, case-by-case, approach to applications that might not have met standard application criteria in the past.

For example, we’ve recently seen Mansfield Building Society cutting its rates on credit repair products open to borrowers who have experienced credit problems such as missed payments, defaults, debt management and bankruptcy.

Atom Bank also has a Near Prime mortgage range for people with less-than-perfect credit scores who have struggled to secure a mortgage with a traditional lender. The bank doesn’t apply credit scoring in its lending assessment for Near Prime mortgages.

Taking a pragmatic approach to historic credit or debt issues is increasingly relevant as financial pressures continue to bite.

While inflation and living costs are coming down, households are still reporting money worries, including where mortgages are concerned.

In an April 2024 ONS public opinion poll, 40% of respondents said they found it ‘very’ or ‘somewhat’ difficult to afford their rent or mortgage payments in the latest period. This remains higher than when the question was first asked as part of the regular polling back in March 2022, when the figure was 30%.

Latest Bank of England figures show the value of outstanding mortgage balances with arrears increased in the last quarter of 2023, up 9.2% from the previous quarter, and 50% higher than a year earlier. While only a small proportion of total outstanding balances, at 1.23%, this is the highest since 2016.

And we’re still not yet through the process of historically low fixed-rate deals coming to an end, which could compound the situation for some homeowners. According to USwitch analysis of ONS data, more than 600,000 households are facing interest rate rises when renewing fixed rate deals in the first half of this year.

Income streams are also becoming more complex as people take on second jobs, venture into self-employment, or dabble in side hustles, either to make ends meet or in search of a better work-life balance. All of these scenarios can lead to a less straight forward mortgage application process.

Navigating different personal circumstances to find a mortgage deal that works is absolutely where brokers are worth their weight in gold.

Intermediaries have a key role to play in understanding the various niche scenarios that a client can present with and the lenders that cater for them.

To be truly successful at this, we need to go deeper than an online search. It’s about gaining detailed knowledge of the lenders that will accept complex cases and the ins and outs of their criteria.

It’s why at Rosemount Financial Solutions (IFA) Ltd, we’re always keen to work with a broad spectrum of lenders and to build strong relationships with them.

We regularly invite lenders to meet with our advisers at peer groups and workshops so they can go through their product ranges with us in detail. It gives our intermediaries an excellent knowledge of the different solutions that can help clients with more specialist circumstances.

It’s a two-way street as well. These sessions provide an opportunity for advisers to feedback on any challenges their clients are facing in accessing the funding they need.

By working closely together in this way, while taking the time to understand the nuances of different personal circumstances and the offering from various lenders, we can help to secure positive outcomes in a wider variety of cases.