In this ‘In Focus‘ piece, Rob Lankey, National Sales Director, Afin Bank, explores the growing role of brokers in guiding clients through a challenging mortgage market.
It’s at times like these that we really appreciate the true value of mortgage brokers. With mortgage products being pulled daily, interest rates rising and gloom descending on the economy, brokers will provide their clients with calm, expert mortgage guidance.
Rather than just finding the lowest headline rate, brokers can help their clients by guiding them through the different mortgages available and discussing how they might suit the borrower’s personal and financial circumstances. Do they want a mortgage deal that gives them the certainty of fixed repayments, or perhaps the client wants a product that has more flexibility.
As always the first step is affordability because it is the foundation of long-term resilience. Sustainable affordability should be based on salary, consistent income or strong net assets, rather than putting too much emphasis on variable elements such as bonuses or pay increases. Borrowers need to consider whether their repayments will be manageable if interest rates rise or their household spending increases.
With mortgage options dwindling rapidly, product choice is more important. This means working with the client to choose a product that works now and sets them up for the future.
Lower short-term fixed rates may be suitable for clients expecting positive changes in their financial circumstances or who might be reviewing their property plans soon. For borrowers who want more confidence around their monthly repayments, longer-term fixes provide certainty and protection against rate rises.
At Afin Bank we offer a tracker mortgage with no early redemption charges (ERCs) so borrowers can peg their monthly repayments to the Bank Base Rate but can switch to a fixed-rate deal penalty-free if their circumstances change.
The structure of the loan can play a significant role in resilience. Extending the loan term can improve monthly affordability, while maintaining the option to overpay when finances allow, with a suitable product. Opting for a smaller loan and increasing the deposit, perhaps by utilising gifted deposits from family, can also make affordability more manageable.
For borrowers who have more equity, using a remortgage to release capital could be a sensible option, particularly if they use those funds to pay off more costly borrowing. This means looking at the client’s entire financial situation rather than simply focusing on their mortgage needs.
Mortgages with flexible features could be appealing for some clients. Products that allow overpayments mean borrowers can reduce their loan amount if they find themselves with spare cash, without impacting their monthly payments.
Timing is important as waiting until the end of a deal period can limit options, particularly if rates move unfavourably or lending criteria tighten. Brokers should initiate remortgage conversations well in advance – often six to nine months before the end of the client’s current deal – to give borrowers time to assess options.
Many clients fall outside of mainstream lending criteria because their circumstances do not fit the automated tick box approach, particularly when it comes to employment. As the economy tightens, employment can be hit hard, so people who have had jobs with secure incomes now can find themselves self-employed, pivoting to contracting or working multiple jobs with varied income streams.
For the self-employed, Afin will consider forecasted income, while for contractors, we will consider lending from day one of a contract if the borrower has sufficient experience in their field. For people with multiple income streams, we will look at the entirety of their financial situation and earnings rather than just focusing on a single income.
Even those with strong financial situations sometimes need the common-sense approach of a specialist lender. At Afin Bank, qualified professionals will be considered for enhanced lending of up to six and a half times their income. For high-net-worth borrowers we will take into account their net wealth when considering affordability, including assets ranging from pensions and property through to investments and even art.
And for people from overseas working in the UK on a visa, such as skilled workers in healthcare or qualified professionals in financial services, Afin can offer mortgages of up to 95% LTV after only six months in the country, with no credit history.
When the economic environment becomes uncertain, brokers and lenders can help borrowers by getting a deeper understanding of their needs and their circumstances to be able to find a sensible mortgage solution.
For brokers, this elevates their advisory role to someone who is instrumental in designing a mortgage strategy that can help borrowers in uncertain times, supporting financial resilience during the current environment.
