Perhaps understandably, when asked to name all the different mortgage lenders they know of, the average person would likely have just a handful of examples.
However, the truth is that there are well over a hundred different mortgage providers in the UK. They range from well-known high-street names to much smaller providers that offer more niche, or specialist, types of mortgages, which are often suited to people with unique or complex financial circumstances.
This is significant because despite the UK having one of the healthiest and most competitive markets for mortgage borrowing, very few people use this to their advantage when the time comes to buy a new home or re-finance an existing loan.
This presents a challenge because not every mortgage provider is ‘right’ for every person, and it takes a bit of exploring to find the best one for a person’s needs. Some lenders specifically cater for certain types of borrower, such as the self-employed, or those who may have had, or currently have, some problems with their credit ratings.
Others may cater for borrowers who are looking for a buy-to-let mortgage.
There are lenders catering for a variety of needs
While some people’s finances were left relatively unscathed by the pandemic, others have not been so fortunate and for those whose financial wellbeing has been affected, it’s now more important than ever that they plan carefully if they are now seeking a mortgage.
This is particularly true for those who have found themselves needing financial support, perhaps because they have been on reduced furlough income, and/or may have needed to take a payment deferral for a period.
Exploring the full range of product options available is essential in order to find the right fit – and the best way to do this is to seek advice from a professional mortgage adviser.
When Intermediary Mortgage Lenders Association (IMLA) asked its members earlier this year about the role of advisers in helping people to get a great mortgage deal, two thirds felt that applicants would find a product that better suited their needs if they sought advice.
More than nine in 10 also agreed that using an independent mortgage adviser would be particularly helpful to people whose financial circumstances may be complicated by the fact that they have multiple occupations and/or irregular income.
How to find the right lender
Mortgage lenders vary hugely in size and nature – so it’s important to take the time, when speaking with a mortgage adviser, to understand just which ones are likely to suit the individual applicant.
The big high-street names, such as Barclays, HSBC, Halifax and Santander, lend large volumes of mortgages – and their processes therefore tend to be highly automated.
Other, smaller, lenders are able to spend more time on each individual case, which means they may be better placed to consider complex circumstances.
Neither approach is “better” than the other – it’s a question of which suits the borrower best. A borrower with non-standard circumstances could find themselves being refused a loan by one of the large mainstream lenders.
But that doesn’t mean they won’t ever be accepted for a mortgage – just that they would likely find success elsewhere, perhaps, from a regional building society or specialist lender.
How has Covid impacted mortgage lending?
When the pandemic hit, mortgage lenders, like many other businesses, had to adapt quickly to new styles of working, with many staff based at home.
This meant that business operations had to be simplified so that lenders could continue to prioritise serving their existing borrowers – and this resulted in a number of mortgage products being temporarily withdrawn.
The market has re-emerged from the pandemic remarkably strongly, boosted in no small way by the stamp duty holiday, which encouraged a number of people to move and take advantage of the tax break.
Lenders have also been able to restore their product ranges: some 58% have brought back higher loan-to-value products, which are particularly helpful to first-time borrowers, who typically have small deposits.
Overall, there are now almost twice as many products as there were this time last year (around 5,000), according to Moneyfacts.
However, lenders have not just returned to their pre-pandemic product offerings. They have also adopted innovative approaches in order to better cater for borrowers who were specifically impacted financially by the financial crisis.
Our research found that 63% of lenders have launched new products to support borrowers with non-standard circumstances or are amending their criteria for accepting a wider range of individuals for existing products.
In addition, many lenders are adopting more flexible approaches to underwriting. For example, in recognition of the difficulty which some applicants would have had providing proof of earnings during the periods of lockdown, 16% of lenders have reduced the period for which such proof is required.
Our research also shows that 88% of lenders will lend to the self-employed, 71% will lend to borrowers with irregular incomes, and 46% will lend to borrowers with impaired credit.
Those seeking out a new mortgage now have many opportunities to secure a suitable mortgage at a competitive rate. A professional mortgage adviser will be able to help them identify and explore the best options.
Kate Davies is executive director of the Intermediary Mortgage Lenders Association (IMLA)
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