Half of UK homeowners feel that they would find it hard to get a mortgage today, new research shows.
According to a report by challenger bank Masthaven, three out of five people believe that they would find it hard to get a mortgage – with 50% of UK homeowners feeling this way.
Jon Hall, managing director of Masthaven, said: “Just as homes have kerb-appeal to buyers, it seems people have a perceived sense of their own mortgage-appeal to lenders.
“Our report highlights how many people believe they have low or no appeal to mortgage lenders – they have little faith in the market.
Since the introduction of the Mortgage Market Review in April 2014 anyone taking out a mortgage is now subject to stricter lending criteria to check that they can afford to repay.
Unfortunately, some borrowers who no longer meet the necessary requirements are unable to get a new mortgage despite their circumstances not changing.
People who have become trapped on their current deal and find themselves unable to remortgage are known as mortgage prisoners.
Masthaven’s new Game of Loans report also highlights how people feel the mortgage market must adapt to appreciate their changing lives.
Eight out of 10 people surveyed believe lenders should make an effort to understand homebuyers’ individual circumstances. This view is strongest among people aged 55 or over (88%), UK homeowners (84%) and parents (82%).
Nearly three in four (74%) people surveyed said they feel that meeting repayment criteria should determine mortgage eligibility, not age. Moreover, three in five (60%) of those surveyed believes that everyone who can afford the repayments when they retire should be eligible for a mortgage.
“Whether these homeowners’ beliefs are founded or not, the industry cannot ignore how customers feel – their perceptions need attention. I believe the industry can adapt, and we’re publishing the report to encourage lenders to look at the new face of home borrowing: ordinary people with normal lives,” said Hall.
“The UK mortgage industry must create products and processes that are fit-for-purpose for society today – a world that’s rapidly evolved and looks different to even just a few years ago.”
Time for change
Masthaven suggests that despite new mortgage regulations providing a more stable framework, lenders have not adapted their approaches to cope with evolving financial lives.
The bank is urging lenders to look closer at individual borrowers’ lives, so they can create products and processes that are fit for modern life.
Its suggestions include:
Self-employed: Given the continuing rise of this workforce, the mortgage industry needs to take a fresh look at how it can support them. Affordability models need to reflect the concept of self-employed income; in many instances self-employed borrowers cannot even get past the initial mortgage selection criteria and progress their case to a trained mortgage underwriter, who would have the skills to be able to read and assess their company accounts.
Parents: The robust affordability criteria have been set for a very good reason, but in many cases parents believe they can afford to make the mortgage repayments. Responsible lenders should be working with brokers to help find affordable solutions that are fit for modern families.
Younger borrowers: Continued innovation is needed to help first-time buyers onto the property ladder. From unlocking intergenerational wealth and helping grandparents and parents with equity in their homes support their families, to boosting the building of affordable homes.
Older borrowers: The old adage of paying off your mortgage pre-retirement simply isn’t realistic for many people today. As the Government launches Lifetime ISAs to bolster home ownership for the under 40s, it should also consider solutions for an ageing population which keeps mortgages alive for longer.
So Game of Loans will also come to an end soon. We need to be ready for The white walkers ( greedy banks ) and also fend off the buy-to-let Lanisters.