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email: holly.andrews@saffronbs.co.uk

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AToM, Brightstar Financial; Brightstar Club, John Charcol, Knight Frank Finance, LargeMortgageLoans.com, Platinum Options, Positive Lending, Private Finance, Sammon Mortgage Management Ltd, TBMC, Vantage Finance, 3mc; 3mc Club, Tenet, Complete FS, Intrinsic, Mortgage Intelligence, Next Intelligence

email: lewis.wheeler@saffronbs.co.uk

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email: mortgage.processing@saffronbs.co.uk

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Blog

Father’s Day Brings Opportunity

A gifted deposit could be a solution for your First Time Buyer clients

On ‘Father’s Day’ many Dads from up and down the country will be receiving an array of gifts and cards from their children showing how much they are loved and appreciated.

Although it’s great to get recognition in this way I suspect many parents prefer the traditional role of ‘provider’ and would actually feel more comfortable ‘giving’ to their children, rather than ‘receiving’. Father’s day is perhaps the perfect time to reflect.

Gifting a mortgage deposit, whether on Father’s Day or not, is probably one of the most significant gestures a Father (or parents in general) can make to their children. These children, have the potential of course, to become your ‘first-time-buyer’ clients. Facilitating that first step on to the property ladder will be life changing and creates a clear opportunity for brokers.

Home ownership remains important on many levels both socially and economically. Our homes are a place of sanctuary, security and where significant life events and family occasions will take place. A funded deposit opens the door to helping your clients to secure the best possible mortgage for their first property.

A ‘life changing’ gift

Arguably, your first-time-buyer clients are facing some of the most significant financial challenges for decades, particularly when it comes to house buying. Saving for a deposit is a well-known obstacle.

As a result increasing numbers of parents and grandparents who lived through an unprecedented period of economic, social and cultural improvement, are prepared to gift or loan monies to their offspring for a mortgage deposit. Such gifting is helping them to get onto the property ladder much earlier particularly when used alongside one of the many innovative first time buyer mortgages the broker community has access to.

What has changed?

It’s important to reflect how recent history has affected access to homeownership. Although there have clearly been economic peaks and troughs during the last 50-60 years the financial gains made by the so called ‘Baby Boomers’ (born: between 1946 and 1964) and ‘Generation X’ (born: 1965 and 1980) have been significant. The baby boomer generation alone owns more than half of Britain’s £11 trillion of wealth, giving a clear ability to gift funds to their children (many who are now in their 20’s and 30’s and far less financially secure). This situation gives brokers the opportunity to tap into the first time buyer market in a different way.

Gifted deposits open up first-time-buyer market

Helping secure a mortgage deposit through this method is seen by many as the ultimate ‘financial’ gift. The bigger the mortgage deposit, of course the more financing options are potentially available through specialist broker offerings.

Father’s Day and the opportunity to ‘give’ may come and go but I am confident we’ll see more lending activity serviced by brokers’ utilising this opportunity in the fist-time-buyer market.

Parenting is often built on positive shared experiences – facilitating homeownership through gifting the deposit has to be one of the most meaningful gestures that can be given to the next generation. It’s a solution that benefits brokers, their clients and lenders alike.

Retirees and mortgages…a new approach?

It is time that the industry refreshed its approach to people over 60. The image of people giving up work and then living sedentary lives is out of date, as many over 60s view their mature years as empowering and their retirement as liberating. The new spirit of the older generation is best summed up by a quote from Philip Johnson, the American architect:

“There’s no such thing as old age. I’m no different now than I was 50 years ago. I’m just having more fun.”

This month, I want to take a look at some of the trends that are inspiring a new approach to the older generation and what the industry can do to help.

Changing behaviour

The 2016 Department of Work and Pensions report ‘Future of an ageing population’ revealed that the number of people working beyond their 65th birthday has more than quadrupled in the last 20 years. There are now a record 1.2 million over 65s working in the UK, while there were just 272,000 in 1997. The potential for earnings has increased substantially over the years.

The report also highlights the need for appropriate housing as the population ages. Suitable housing can significantly improve life in older age, while unsuitable housing can be the source of multiple problems and costs. Poor quality housing costs the NHS an estimated £2.5 billion per year. Adapting existing housing stock to meet this demand is seen as critical, and ensuring that new housing can adapt to people’s changing needs as they age will also be important. Suitable housing reduces demand on the health and care services, enabling people to work flexibly and for longer.

The final trend to consider is that ‘baby boomers’ have acquired great wealth over their lives. A report last year by the Resolution Foundation has revealed a pensions windfall, and the housing boom of the 1990s and 2000s has accelerated wealth inequality between generations. Asset-rich retirees have many options open to them.

What does this mean for the mortgage industry?

The industry has to be creative, and develop new, more flexible ways of meeting the increasingly complex needs of older people. There must be products suitable for:

  • over 60s looking to help their children and grandchildren onto the property ladder
  • people adapting their homes to make them more suitable
  • those needing to care for relatives over 60

If the industry can create mortgages specifically for properties which are to be adapted for the occupants’ changing needs I think more new applications can be expected. These could well come from retirees with part-time jobs. In the past, many standard mortgage providers have classified such applications as extraordinary but they could well become more popular in the future.

More and more deposits could come from the wealth of parents and grandparents. At Saffron Building Society we’ve tried to look at new ways to help and we accept gifted deposits on all of our mortgages. We think it’s an essential way to allow the older generation to help those struggling to save for their first home.

Existing products will also have to be reviewed. Lenders need to be more flexible in their approach to the intergenerational market. I don’t see a reason to have rules which can’t be amended in the product design. For example, why have an age restriction? If the application looks sound from a risk perspective, does age really matter? Clearly, the products have to be compliant and sold in a compliant way, but can the parameters for acceptable be more open?

But this need for flexibility applies to all segments of the market. There is a requirement for greater emphasis on the needs for borrowers of all ages to have more choice available to them. But can the industry adapt?

Many commentators talk about artificial intelligence and how it won’t be long until advice is effectively replaced by computers. But there is a tension between a demand for more flexibility and what robo-advice can realistically deliver. I think a mortgage broker’s service is irreplaceable. Consumers will always appreciate the good judgement and experience of someone investing energy and commitment into helping them to secure their new home or review their mortgage arrangements on their existing home. As the makeup of society and housing becomes more complicated, the industry needs to change. But maybe it’s in ways that are not as simple as first thought. For those organisations willing to take a fresh look, with the flexibility to tailor their approach, the retirement market is likely to hold increasing levels of opportunity.

Anita Arch
Head of Mortgage Sales, Saffron Building Society

Source

Saffron Announces New Fixed Rate Mortgage Options

Greater choice for Landlords, First Time Buyers & Owner Occupiers

Saffron Building Society is pleased to announce a range of new and improved mortgage products enabling customers to make the most of the upcoming ‘house buying season’.

This new set of mortgage options will be of particular interest to a variety of customers:

  • Existing landlords who want the security of a competitive fixed rate
  • First time buyers who have a limited deposit
  • Existing homeowners who are either moving house or looking to remortgage an existing property

New – 5 year fixed rate – Buy to let (BTL)

A fixed rate product that aids affordability by rental cover being assessed at pay rate

Rate: 2.87% fixed until 31.12.2023 to 75% LTV
Arrangement fee: 2 %
Early Repayment Charge (ERC): 3 % for 5 years (Flexibility with overpayments)
Loan: Min loan £30k, Max loan £1m
Term: 40 years
Purpose: For purchase or remortgaging
Maximum Age: No maximum
Rental cover:
• Purchase or remortgage with additional borrowing 140% of pay rate
• Debt for debt remortgage 125% of pay rate
Regulated BTL: Accepted
Minimum income: None

First Time Buyer (FTB)

Reduced Fixed rate products aimed at people buying their first home, who have a limited deposit.

Rate: Now 3.57% fixed until 30.11.2021 (was 3.77%) to 95% LTV
ERC: 3 % for 3 years (Flexibility with overpayments)

Rate: Now 3.87% fixed until 30.11.2023 (was 3.97%) to 95% LTV
ERC: 3 % for 5 years (Flexibility with overpayments)

Arrangement fee: None
Loan: Min loan £30k, Max loan £500,000 (Up to £1m within the M25 subject to max 90% LTV and underwriter assessment)
Term: 40 years
Purpose: For purchase or remortgaging
Maximum Age: No maximum

Owner Occupier (OO)

Fixed rate products for existing homeowners who are either moving home or looking to remortgage an existing property, who want to benefit from a fixed rate

Rate: 2.27% fixed until 30.11.2020 to 80% LTV
ERC: 2 % for 2 years (Flexibility with overpayments)

Rate: 2.57% fixed until 30.11.2023 to 80% LTV
ERC: 3 % for 5 years (Flexibility with overpayments)

Rate: 2.57% fixed until 30.11.2020 to 90% LTV
ERC: 2 % for 2 years (Flexibility with overpayments)

Arrangement fee: £999
Loan: Min loan £30k, Max loan £1m up to 80% LTV, £500,000 above 80% LTV
Term: 40 years
Purpose: For purchase or remortgaging
Maximum Age: No maximum
Interest only up 70% LTV
Manual underwriting: We can review any case that doesn’t fit into an easy ‘yes’

All applications will be individually assessed by a skilled underwriter and you will receive a efficient and personal service.

Full product details can be found on our website and you can easily submit a case via our online broker portal.

If you have any questions please speak with our Business Development Mangers, who will be happy to help.

Tips for self-build and custom-build mortgages

If you read my article Is Custom Build the Future of UK Housing? last month you’ll have seen that commentators are predicting that custom build could be the future of housing in the UK, and the main strategy employed by the government to solve the housing crisis. In addition to the trends in custom build, we have seen an increase in the number of self-build applications. Self-build is becoming more complicated due to the lack of available plots so the applications can be for basement conversions and complex renovations. If these trends continue, it means that everyone in the mortgage industry will need to have a deeper understanding of the application process for specialist mortgages.

I have been talking with our underwriters about this topic to find out more about what they see and how their thinking is changing. At Saffron Building Society our underwriters assess complex or extraordinary applications, so they see the common problems and errors in self and custom-build applications. Karen Mepham is one of our dedicated specialists on self-build, and she gave me some useful tips on ways to make sure the application gets a speedy and accurate response.

Planning consent

All applications must be accompanied by full planning consent. If consent is unavailable, it will be impossible to proceed with the application. Planning consent can take approximately 12 weeks. Without it, a mortgage valuer can’t assess the value of the property so it is one of the essential components of the application. Make sure it is in place before you proceed or you will be frustrated by delays further down the line.

Costs of the build

In some instances it is clear that applicants have not fully considered the costs of the build, and detailed costings are always required when applying for a mortgage. Karen says she can very quickly see those applications that need further analysis of the build costs. A lack of detail about costs sets the alarm bells ringing.

A fixed price contract with the builders always provides more certainty, and without one more information will be required.

Affordability

A common but surprising mistake is that people forget they will need somewhere to live while their renovation or house is being completed. Rental costs affect affordability and have to be included. It sounds obvious, but you’d be surprised by the number of people who forget this critical piece of information. Additionally, people need some form of contingency plan with savings to fall back on should an unexpected event happen. No matter how well a project is estimated, there may be unknown costs that crop up along the way.

Warranties

A warranty provides the guarantee that any future problems will be fixed by those responsible for the build. However, construction warranties come in many different shapes and sizes. Before submitting an application it’s important to check the warranty the applicant has in place and make sure that it’s acceptable to your chosen mortgage provider. People are increasingly using architect’s certificates, but this is a little riskier and will need further investigation by the mortgage provider, who will usually have a list of acceptable warranties.

At Saffron, we accept the well-known, proven providers such as NHBC, BLP, Premier Guarantee, CRL, ICW Ltd, Aedis. Other providers are considered on a case by case basis.

Stage Payments

We try to work as flexibly as possible with applicants as we have experience dealing with the many different variables which occur during a house build. However, to ensure a swift response, we need to understand the applicant’s needs in respect of how they require to draw down the stage payments. We can then confirm that these are realistic and have comfort that they will be able to complete the work with the funds they are requesting.

Planning, Planning, Planning

Karen’s mantra is that time invested in getting a good offer in place significantly outweighs a quick response. Sometimes, making an application with half the information seems that it will get the ball rolling but the risk is that you’ll have to go back to your client with lots of questions only to run the risk of getting a negative response later down the line. It will save time if you get the customer to complete the fundamentals of an application in advance.

If you are in any doubt about the requirements for self and custom build applications then feel free to call us for more information.

View our Self Build Mortgage

Regulated Buy To Let Mortgages

In November of last year we extended our lending criteria to include regulated buy-to-let applications. Since then we have been receiving increasing enquiries and I thought it would be useful to share more information on this growing segment of the market.

What is a Regulated Buy To Let mortgage?

Let’s start with some definitions.

Unregulated Buy To Let – also known as an investment property loan, is a mortgage available to landlords who are buying a property with the intention of renting it out. As the name suggests, these mortgages are not regulated by the Financial Conduct Authority.
Regulated Buy To Let – also known as family buy to let. This type of mortgage has a fairly narrow definition; a property that you will occupy either now or in the future, will be let to a family member, or where up to 40% is occupied by the owner with the remainder let.

We extended our lending criteria last year and we now accept applications from:

  • Parents buying rental property which will be occupied by their children or grandchildren (including student housing for up to two additional tenants).
  • People buying property to let to close relatives (that is parents, grandparents, children, grandchildren, brothers or sisters).
  • Expat borrowers living abroad in a non-EEA country, who want to purchase rental property in the UK, which they will eventually occupy when they return home.

Is the Regulated Buy To Let market growing?

It is very difficult to find figures relating to the rates of growth or decline in this niche sector. However, we have noticed that we get a number of enquiries from brokers and parents who want to know more about purchasing properties for children going to university. In The Times Education Supplement (1 December 2017) they estimated that at the end of a typical three-year undergraduate degree, the expected total cost of accommodation is £14,6251.
It’s easy to see why some parents and grandparents are considering alternative options when it comes to funding their child’s education. Rather than paying rent, which will yield no return, investing in bricks and mortar offers much more potential, as well as providing a roof over their offspring’s head.

Why use Saffron?

Many lenders do not provide a Regulated Buy To Let mortgage. Essentially, buy to let mortgages are put in place to help a business venture, individual or company to borrow money to purchase an income-generating asset which could yield a long-term capital return. Mortgage lenders need to be sure that the venture is being run on a commercial basis.

However, there is a blurring of boundaries between residential and buy to let mortgages when families and overseas residents are involved. Some lenders compare this added complexity with the level of demand for regulated products, and decide it could make them uneconomical to manage and service.

However, we have built our reputation on our ability to manage complex situations and out-of-the-ordinary mortgage applications. All applications are checked by an underwriter which means we can look at the circumstances in greater detail and use our experience to make a decision.

Saffron’s lending policy

If you are looking at a Regulated Buy To Let we advise that you contact our dedicated BDMs to talk about the application. However, please bear in mind these key elements of our policy:

  • Property can be let to a family member and up to an additional two tenants.
  • Minimum and maximum loan amounts will be line with standard BTL products
  • Maximum LTV as per standard BTL products – currently 75%

Ex-Pat Applications

A regulated mortgage will be considered as foreign currency, and therefore declined as part of our policy, when the following criteria apply:

  • The borrower resides in an EEA state, or
  • The income or assets used to repay the loan in a currency other than Sterling

Affordability

The approach to affordability will follow that used for regulated residential mortgages, and in most cases it is expected that the assessment will be similar to that for second homes. As a regulated mortgage contract, affordability will be based on personal income and expenditure rather than rental cover. You can find our acceptable income definition in the residential criteria section of our intermediary website. Please note, this excludes any rent payable by any family member.

The example below demonstrates how this works:

  • Parents (the customers) wish to purchase a house for their daughter and her two friends to live in while at university.
  • Each will pay £500 per month in rent.
  • The mortgage required is £200k.
  • The customers have a combined annual salary of £50,000.
  • They have a residential mortgage costing them £500 pm but no other buy to let properties.

Affordability would be calculated as follows:

  • Rental income is calculated as 50% of rent from the two non-family tenants. Rent from the family member is excluded for the purposes of affordability.
  • Annual Income: £56,000 (their annual £50,000 salary plus £6,000 rent).
  • Monthly outgoings in the form of their own residential mortgage at £500 per month.

If you want to learn more about Regulated Buy To Let mortgages, please contact one of our Business Development Managers.

Anita Arch
Head of Mortgage Sales

Source:
1 https://www.timeshighereducation.com/student/advice/cost-studying-university-uk#survey-answer

Is Custom Build the Future of UK Housing?

Many of you will be familiar with the term ‘custom build’ but if you’re not, it’s worth familiarising yourself with the concept. Many are predicting that custom build could be the future of housing in the UK and the main strategy employed by the government to solve the housing crisis.

What is custom build?

Custom build homes are self-built homes that are facilitated by a professional developer. They offer the chance to have a unique property that suits an individual’s lifestyle and preferences but minus the high degree of involvement associated with traditional self-builds. Custom building can describe a single one-off home commissioned by an individual and built by a developer, or a group of homes built by a developer but offering the future occupants the chance to tailor the design.

This way of building removes some of the usual frustrations of self-build, such as having to find a plot with planning permission or not having the necessary experience for building your home on your own.

Why is custom build a solution to the housing crisis?

The UK lags behind other developed nations in custom-built homes, but that could be about to change. Their advantages mean that the government sees this form of construction as one of the ways to solve the nation’s housing problems. Graven Hill in Oxfordshire is one of the largest experiments in modern day housing the country has ever seen. An entrepreneurial local council has bought hundreds of acres of disused Ministry of Defence land, created housing plots, then the street layouts, schools, and infrastructure to support them. Buyers can select a plot then design their home, which gets fast-tracked through the planning system.

The council spent £28m buying the land, and hopes to make a profit. Other councils are looking at the project with a view to expanding the concept across the country. It’s easy to see the attraction for local councils as it is an investment likely to boost depleted coffers while at the same time solving housing problems.

The problems

The problems brokers and lenders might face concern the valuation and unique design of these properties. Kit homes are growing in popularity and could play a major part in the rise of custom built homes. One of the biggest problems with kit homes in the past has been the availability of land. Take that problem away and there’s no reason not to look at a construction method seen as a more efficient way of building than bricks and mortar.

When people think of kit homes they think of Huf Haus, which up to now has dominated the UK kit home market. One of the popular misconceptions is that custom homes are just for the wealthy. It’s simply not true, some are available from as little as £50,000 making this form of construction an option to everyone – from first-time buyers to people who are downsizing in retirement. There are now many UK start-ups challenging the dominance of Huf Haus with individually designed and digitally manufactured homes. The fall in the pound since the EU referendum has helped these start-ups enormously.

This means that lenders will need to be more flexible, with a tailored approach to this growing trend in housing. Those unable to be flexible in their lending procedures will struggle to support brokers and their customers effectively in their attempts to service the demand.

Be ready for the future

I suspect we are going to see more mortgage applications for custom-built houses. In essence, the requirements will be similar to a self-build mortgage, where funds can be drawn down in stages. The challenge will be in the unique design and the difficulties involved in valuation. However, for flexible lenders with experience in self and custom build mortgages it will just be another day at the office. We believe custom-build is going to be a growing segment of the market and one which will experience significant growth over the medium to long-term.

View our Self-build mortgage

Market Trends in Buy To Let

The buy to let business has been of real interest recently. There was a lot of concern for the future with the new legislation last year, and fears that the market could become depressed and start to falter. However, according to the latest Property Investor Surveyor, 44% of landlords were described to be ‘unperturbed’ by the new affordability calculations and specialist underwriting rules introduced by the Prudential Regulation Authority.

The report suggested that as many as 48% believed they had not been affected by the new affordability and tax changes, but did caution that this could be because some landlords have not yet applied for finance since the guidance was introduced.

While legislation might alter the dynamics of the market that many people are accustomed to, a change of this kind can present new opportunities and force those within the industry to adapt their approach in order to continue to thrive. Over the last year I’ve been keeping a close eye on market developments and a few trends have been quite revealing.

Easter Activity

In January I read a good article in Mortgage Introducer, about the potential surge in the buy to let business which many are predicting will occur this spring. April 2018 is precisely two years after the clamour to get deals done before the 3% stamp duty surcharge was introduced. A significant number of landlords took out two year fixed rate deals, and could very soon now be making plans to refinance.

The article reported that the estate agent chain Haart saw a 35% increase in property exchange activity in the week before the regulation was enforced at the beginning of April 2016. With the recent predictions of rate rises later this year, buy to let landlords may well be looking to lock in their rates for the foreseeable future.

An alternative view was that less experienced landlords might decide they want to cash in and move on. They may decide to sell, rather than continuing in a period of tighter controls and reduced short-term profitability. This could increase the amount of available property on the market.

Pensions for the young

Is property still a good long term investment? While stock market values have been steadily increasing over the last two years, the recent falls have been a clear reminder about volatility. Is property about to become fashionable again? Research from the Commercial Trust showed that only one segment of the buy to let market (the 20-40 age group) has continued to increase since 2015. One explanation is that younger people may think it more worthwhile to invest in bricks and mortar than in other asset classes such as shares and government or corporate bonds.

The largest market share is still held by the 40-49 age group, which consistently accounts for just under a third of all purchase applications. In addition, with the increased cost of university education, some in the parents in their mid-40s are opting to buy a property for their children at university and use the extra income from rented rooms to subsidise this increasingly significant cost.

Maybe property and buy to let is starting to become a major part of long-term investment portfolios amongst the young?

Portfolio Landlords Struggle

While some market segments are reporting positive sentiment, other parts of the industry are clearly feeling the pain. According to Foundation Home Loans, nearly three-quarters of portfolio landlords have found it more difficult to secure a mortgage since the PRA changes were introduced. The study found that 70% of landlords with four or more buy to let (BTL) mortgages have found it hard to obtain finance, and 51% of those with three or fewer BTL properties said the same.

As with all new regulation there will be a period of difficulty as people adjust, so it’s important to look at the long term trend rather than to read too much into the immediate response. The change in regulation could drive out inexperienced landlords, leaving a higher concentration of professional ones who see property as a full time occupation. According to research from the Intermediary Mortgage Lenders Association, just over a fifth (21%) of landlords have indicated that they plan to reduce the size of their portfolios.

It will be interesting to see how the market develops over the next year.

Flexibility

I mentioned in last month’s article that I feel the industry is currently relying too much on robo-advice and artificial intelligence to make mortgage application decisions. I believe that lending decisions are becoming more complex with the change in working patterns, the uncertainty over Brexit and regulation. This particularly applies to buy to let, as regulation has left everyone sailing in unchartered waters.

That’s why I think experienced lenders with the flexibility to review complex cases will continue to be in high demand over the next year. So while these are certainly challenging times it is still possible to lend successfully in the buy to let sector.

The solution for complex applications

The world of financial services sometimes seems obsessed with efficiency at the expense of understanding the changing needs of customers and society. Occasionally it feels as though some large organisations want to keep the mortgage production line rumbling along with applications from people who all look quite similar. This can work quite well until people stop looking similar and start to look different.

The changing face of British home owners

Brokers know better than anyone else that every client is different. As more people start to work for themselves, with several part-time jobs or a salary heavily based on performance targets, things can get more complex.

Some differences may be small and easily accommodated within standard lending criteria but others will leave many lenders scratching their heads wondering how to deal with it all. The result of such deliberations can often be a firm ‘no’ to avoid slowing the production line, rather than taking the time to identify a solution.

The changing face of lenders

We think diversity and difference is a good thing. Our approach acknowledges the importance of speed in mortgage applications, but we also believe in taking the time and making the effort to find a solution. Our experienced underwriters assess each and every mortgage application that comes to us and aim to find a solution. We also have a range of products designed specifically for more unusual circumstances:

  • landlords wanting to refurbish properties before letting them
  • ex-pats investing in property back in the UK even if they are a first time buyer or a landlord
  • self-employed borrowers with only one years trading
  • contractors who have daily rates of pay dependent on hours worked
  • people looking to build their own property even if it’s their first home

Additionally, if you have a client whose needs can’t be met even by our specialist products, but who is nonetheless creditworthy, we’ll consider developing an individual solution just for them.

Your weird is our wonderful

We’re used to dealing with unusual circumstances, so there is no way you’ll be able to surprise us. We don’t wince when we see applications that are a little bit different, but see them as an opportunity. We can’t promise to say yes each and every time that something unusual is passed to us, however we can promise to give it our full attention and explore every conceivable option before coming to a decision.

As a broker, we know you need support and options to help you to deal not just with the everyday applications, but with different situations that require a more thoughtful approach. The next time one lands on your desk, think about Saffron.

Taking the ‘Complex’ out of Complex Income Mortgages

Every mortgage customer has a different income story. Those with a regular income will be eligible for most high street products whilst others with a more ‘complex’ income may not. Help is available with tailored mortgage options that are ideal for the growing number of contractors, the self-employed or those needing low interest rates in the early years of their mortgage.

Teaming up with the right lender with the ‘best fit’ mortgage product is essential.

So what does complex income really mean and how does it apply to mortgages? For many lenders, the term covers people who don’t have a typical nine to five job providing a predictable monthly or weekly income.

The world has changed a lot, and many workers are now looking for more flexible arrangements or different approaches to earning a living. I believe many lenders have failed to keep pace with changes in working practices, and adapt their mortgages and lending policies accordingly. Many can have a very narrow view of what is an acceptable profile for a prospective customer. It’s important to see the bigger picture and to ascertain all the details relevant to an individuals’ financial situation enabling families the best opportunity to buy or build a new home. I’m a firm believer in trying to help wherever possible, after all home ownership brings so many positive benefits, it’s a well-documented fact.

But before talking about how this can be achieved, let’s take a quick look at what the industry might classify as ‘complex income’.

What does complex income really mean?

  • Your customer might just have started their own business and have only one or two years of accounts. There are specialist mortgages for the recently self-employed.
  • They might be a regular contractor who finds their arrangements deter high street lenders.
  • They could work in a niche industry considered too risky to lend to, such as the performing arts or professional sports.
  • Their income might regularly contain bonuses or overtime, and make up a high percentage of the total. The variable nature of bonuses and overtime can make the income fluctuate and therefore more difficult to predict.
  • They might be going through a separation and needing a lender that can help them with a mortgage when divorced, and to acquire their new home whilst undergoing this major life change. When couples separate their finances undergo a significant change and therefore may look very different and less predictable in the short term.
  • They could have more than one job.
  • They may be relying on investments or a pension for their income and need a mortgage when retired.
  • They may have had some financial difficulties in the past, but are now in a better position and looking for help to move on.
  • They could be an agency worker, for example an NHS nurse working via an agency.

These are examples of what the industry would define as ‘complex income’ and we know it can be difficult for people to get access to a mortgage. There are many other examples, and the problem people face is that their circumstances don’t easily fit the various boxes that mortgage providers have to tick for their computers to make a decision.

How can you help people who don’t conform to the so-called ‘norm’ to buy a home?

It’s not necessary to have a complex income mortgage product as a one size fits all solution rarely works. What is important is to have the flexibility to look at a customer’s circumstances and make every effort to find a solution that will work for them.

This is the approach I favour as do some other lenders who think laterally, giving the broker and customer more mortgage options. The chances are that lenders taking this approach have already helped people in similar circumstances to your customers who are already settled in their new homes. It’s important to look at everything surrounding your customer’s application and take into account the wider facts before deciding how to best help. For example, we’ll look at your customer’s income structure over several years and their plans for the future.

In my opinion it’s preferable to think more broadly in the mortgage application process rather than assessing your customer against a narrow set of measures. What I do see working well are brokers that get to know their customers and their future plans. This enables them to match people with the most appropriate mortgage possible, including products for the self-employed.

In conclusion, there are a range of options out there for those who traditionally may not have been able to secure a competitive mortgage – assess their situation individually and create a positive outcome for you and your customer.

Home is where the heart is

Let’s show our customers the love this Valentine’s Day

The proverb ‘Home is where the heart is’ may mean different things to different people but to many, including mortgage customers, it will create imagery of a ‘forever home’ with a loved one, a sanctuary, may be a place where fond family memories will be created or where significant life events will take place.

Valentine’s Day is one of the most popular days in the year to make a commitment as a couple – one of the biggest acts of dedication will of course be buying a house together. What a great opportunity to engage with first time buyers!

The opportunity for a mortgage broker is clear but the key to success will hinge on how best to engage with these existing or prospective customers. How can the relationship be optimised?

Lessons in Love

There are many routes to making a partnership work with principles and best practises found in a personal relationship, also relevant in business:

  • Everyone is different – let’s not try and squeeze our customers into a ‘one size fits all’ mortgage – find a product that exactly suits their circumstances. With the changes in how people work it’s now more important than ever before to understand their needs and plans for the future.
  • Good communication – we all thrive on timely, informative communication keeping everyone on the same page, the mortgage application process with a customer is no different. Setting expectations and delivering against them is important, and people will forgive you for taking their time if they know you are working hard for them.
  • A listening ear – it’s important we listen and understand the needs of our customers. They may have slightly unusual circumstances or a complex situation but listening carefully can help to bring about a successful outcome.
  • It’s good to talk – partner with a lender who has a team at the end of the phone who can answer any questions you and your customer may have. They have a responsibility to listen carefully too.
  • Reliability – you need to work with a mortgage provider who will deliver what they said they would and when. Your customer needs to feel secure and not left hanging or facing the unknown during what is often a stressful time.
  • Always there when needed: work with a lender who you can always rely on, who gives a wide range of options and who will provide great customer service.

Valentine’s Day is a timely reminder of the importance of relationships – how they are formed, developed and grow. Whether it’s in our personal lives or in a business context, the time, understanding and consideration that we put into any relationship will benefit us all in the long term – no more so than in the relationship between the mortgage broker and customer.

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Best Service from a Mortgage Provider - Moneyfacts Awards 2014