Mortgage cases with one or two complications are becoming the new “vanilla” as affordability pressures and changing borrower circumstances push more customers beyond traditional high street criteria.
The changing shape of the market emerged during the latest Knowledge Bank Lenders Live session, where lenders and brokers discussed affordability, economic uncertainty and the increasing complexity of mortgage applications.
A live poll found affordability and economic uncertainty were jointly the biggest factors holding buyers back, each selected by 46% of respondents. Just 8% pointed to fears of further house price falls.
The 190th Lenders Live brought together Chelsea Pordage, business development manager at Aldermore; Jamie Lennox, owner and adviser at Dimora Mortgages; and Michael Brown, head of intermediary relationships at April Mortgages. The session was hosted by Knowledge Bank sales director Shane Chawatama (main picture, inset).
COMPLEX IS THE NEW VANILLA
The panel argued that the slowdown in buyer activity could not simply be attributed to the traditional summer lull, with borrowing costs, pressure on household finances and wider economic uncertainty causing some customers to delay decisions.
At the same time, borrower circumstances are becoming more complicated.
Knowledge Bank recorded more than 6,800 lender criteria changes during August, the highest monthly total this year, alongside almost 6,000 new criteria being added.
Maximum age at the end of the mortgage term remains a significant area of broker research, while joint borrower sole proprietor, foreign national, visa and satisfied-default criteria are also attracting attention.
Pordage said: “The kinds of cases brokers are bringing to me may only have one or two quirks that the high street does not currently have the appetite for.
“Cases with one or two quirks have become the new normal—they have become the new vanilla.”
DEBT CONSOLIDATION MOVES UP THE AGENDA
The changing profile of borrowers is also feeding through into the remortgage market.
Some 616,150 residential remortgage searches were completed on Knowledge Bank during August, 11% more than a year earlier.
Capital raising for debt consolidation has also risen from 15th to tenth among searches on the platform.
Lennox suggested debt consolidation could become an increasingly significant consideration as borrowers reach the end of cheaper fixed-rate deals while carrying unsecured debts accumulated during the cost-of-living crisis.
However, he cautioned that consolidating debts into a mortgage required thorough advice and a conversation about future financial behaviour rather than being treated as a solution that could simply be repeated.
Lenders are also adjusting their appetites. Asked what more than 6,800 criteria changes in a single month indicated, 46% of the Lenders Live audience said the market was becoming more complex, while 31% believed lenders were becoming more flexible.
Chawatama said: “We are seeing high-street lenders stretch their criteria into areas they might not previously have considered.
“That, in turn, encourages building societies and specialist lenders to stretch even further. For brokers, keeping pace with those changes and researching the whole market has never been more important.”
AI COULD INCREASE VALUE OF ADVICE
The panel also considered what growing consumer use of artificial intelligence could mean for mortgage advisers.
AI can help borrowers research terminology, products and mortgage concepts before speaking to a broker, but the panel warned that customers could place too much confidence in information that was incomplete, inaccurate or failed to take account of their individual circumstances.
Rather than replacing advisers, Lennox argued that the technology could reinforce the value of personalised advice as mortgage cases become more complicated.
He said: “People will still value people.
“We are potentially talking about the biggest financial decision someone will make in their life. There will continue to be a significant opportunity for personalised advice tailored to the customer’s circumstances.”
The discussion highlighted the distinction between technology providing an answer and an adviser asking the questions necessary to establish whether that answer is appropriate for the individual borrower.
THE NEXT GENERATION OF LANDLORDS
The changing face of buy-to-let was also discussed, with research presented during the session predicting Millennials and Generation Z could account for 62% of landlords within the next decade.
Inheritance could play an important part in that shift, with more than a third of aspiring landlords expecting to inherit a property they could rent out. Others expect to inherit money that could be used towards a property purchase.
The panel suggested younger landlords could start with smaller portfolios, build them more gradually and retain investments for longer.
That could also change the relationship between brokers and landlords, moving it from arranging individual mortgages towards supporting clients across a longer-term property investment and portfolio journey.
‘UNDERSTANDING THE COMPLETE CLIENT STORY’
Chawatama said: “Across every topic, the message was consistent. Clients are dealing with more uncertainty and more complicated circumstances, but lenders are continuing to adapt.
“The opportunity for mortgage professionals is to bring those two sides together: understanding the complete client story, keeping up with changing criteria and giving customers the confidence to make informed decisions.”
Lenders Live is hosted by Knowledge Bank and brings together brokers, lenders and other mortgage market professionals to discuss the issues and trends shaping the industry.
