Brokers have come to the defence of lenders after a report claimed they are failing to cater for large sections of the mortgage market.
Challenger bank Masthaven has published a study claiming lenders have not adapted their approach to the self-employed, older borrowers, parents, and younger borrowers, who sometimes struggle to obtain mortgages.
The report is based on a survey by Opinium Research of adults aged 18 and over which reveals the majority of these groups - and 60 per cent of the general UK population - believe they would find it hard to get a mortgage.
Opinium surveyed 2,003 people in January 2017 then repeated the survey six months later among 2,008 people in July 2017
The claim is that many borrowers feel unsupported because they think affordability constraints are preventing them from getting on the housing ladder.
But brokers on the ground who are actually engaged in sourcing mortgages for clients have denied there is a problem and pointed out that many of the rules are necessary to guard against unsafe lending.
Bob Riach, principal at Scunthorpe-based Riach Financial Advisers branded the challenger bank’s claim “rubbish”.
“Lenders are catering for the self-employed - I do a lot of mortgages for them,” he added.
“Most lenders want three years’ accounts. What they will normally do is take an average – the first year’s accounts are often not that good because it is expensive starting the business.
“For limited companies, what they tend to do is take the last three years’ salary in dividends. It is a little bit difficult, but it is still doable.
“With elderly people, a lot of lenders will lend past retirement age to 80 or 85 – but what they want is proof of retirement income.”
Ian Gwinnell, director at Stafford-based All Counties Financial, pointed out that many lenders had dropped self-employed income requirements from two years to 12 months.
“I feel that is reasonably responsible,” he said. “They say the first two years [of being self-employed] are the most difficult; I would say it is probably the first 10 years. Even for those with one year of trading accounts, I think the lender is taking a big risk.
He added that younger buyers can also pose a risk to lenders due to their lack of credit history.
“A lender will naturally adopt a more cautious approach, whereas someone in their 30s or 40s with a number of credit agreements will probably be offered slightly better income multiples than younger borrowers,” he explained.
Mr Gwinnell also described lenders’ approach to older borrowers – lending up to the retirement age and thereafter assessing eligibility based on pension income – as “reasonably lenient”.
But Kevin Hever, helper and adviser at Wolverhampton-based Cornerstone Financial, lent his support to Masthaven’s claims about the self-employed.
“To my mind, they don’t seem to be treated as fairly as employed people – and there has been a massive upsurge in self-employment,” he said.
Mr Hever pointed out that there is an inconsistent approach from lenders regarding proof of income for self-employed people, with some demanding up to three years’ worth of accounts.
“Then when you send off the books, they can be viewed in different ways by the underwriting department,” he said. “There is always an element of uncertainty.
Mr Hever added that although he welcomed the end of self-certification – when the self-employed did not need to provide proof of income – he felt that the stance taken by lenders had swung too far in the other direction.
Responding to the comments, Jon Hall, managing director at Masthaven, said: "As the report states, we recognise that recently UK lenders have started to increase their terms to cater for older homebuyers – but in many cases it is simply a matter of moving the numbers around – increasing an age criteria upwards of say 75, but without rethinking how they assess retirement income.
"We also highlight how UK lenders continue to work hard to help homebuyers by flexing rates and designing products to suit modern society, for example: people who are self-employed.
"But our study brings to light evidence that the modern mortgage market has disaffected some people – half of UK homeowners surveyed believe they could not get a mortgage today. So there is work to do to build confidence among those who can genuinely afford a mortgage."
simon.allin@ft.com
