Rapid Lender Criteria Changes Create Problems for Brokers

Increasingly, mortgage brokers are experiencing difficulties keeping up with the continuous changes in lending criteria introduced by the lenders they represent.

A poll conducted by Smart Money People suggests that the majority of brokers are struggling to keep track of lender eligibility requirements and general qualification criteria due to the speed and regularity with which they are being amended.

Of the 751 brokers polled, almost half (43%) said that they relied primarily or exclusively on emails (and similar communications) from lenders for information on lending policy updates. Brokers said that while technology is simplifying the process of keeping on top of lender policy shifts, no current systems are enabling them to respond to lenders’ policy changes in real-time.

As a result, brokers face the prospect of more complex and time-consuming application processes or the risk of providing their own clients with inaccurate information.

“The findings we’ve published today indicate the extent to which mortgage brokers have found it difficult to stay on top of all the movement in lenders’ product offerings, brought about by the recent economic turmoil,” commented Jacqueline Dewey, CEO at Smart Money People.

“Brokers are certainly frustrated that some lenders are changing rates on a Friday evening or Sunday, making them feel they need to work out of hours.”

“With so little notice, it’s adding a lot of extra pressure to already stressed brokers.”

Major shifts in lending policies

The significance of the issue is highlighted by the number of high-street lenders that have made sweeping adjustments to their lending policies over the past few weeks.

As lenders become increasingly reluctant to hand out high LTV mortgages in the current financial landscape, data from Moneyfacts suggests that around 65% of all mortgage deals with a 5% deposit requirement have been taken off the market entirely.

This is likely to cause a major concern among prospective homebuyers on low incomes, who may be entirely unable to come up with the typical deposits needed to qualify for a mainstream mortgage.

“First-time buyers are some of the lowest income-earners in the UK, and when house prices are up to 10 times the national average of wages in some areas, it has proven extremely difficult to obtain a mortgage,” said James Miles, of The Mortgage Quarter.

“The good news is that lenders are still lending and there are enough loans, but we are seeing mortgages being taken over a longer term to ensure payments are affordable for first-time buyers.”

“I would expect this to continue until the UK can get inflation under control, which will then have a knock-on effect of rates coming back down.”

Analysts remain confident that average interest rates will not be quite as high as predicted during the first half of next year, which may come as some comfort to those already paying around 6% on their home loans.

But with further house price growth on the cards for the foreseeable future, there is no immediate light at the end of the tunnel for those who have found themselves priced entirely out of the market.