How to help complex clients onto the mortgage ladder

This article is part of
Guide to the return of subprime

How to help complex clients onto the mortgage ladder

Advisers and brokers with clients who may be described as credit impaired or who have more complex borrowing needs must ensure they are not left at risk of missing repayments.

Getting the right mortgage deal is vital, regardless of a client’s financial history but especially given that, as Charlotte Nelson, press officer at Moneyfacts points out, the cost of mortgage deals aimed at those with a tarnished credit history “can be significantly higher than standard deals in the market, reflecting the extra risk that is involved”.

While the low interest rate environment has prevailed in the UK for some time, there is also the threat that the Bank of England’s monetary policy committee (MPC) will begin raising interest rates more aggressively and quickly this year and in 2019.

David Torpey, chief operating officer at Bluestone Mortgages, says: “Brokers should think carefully about their clients’ current and expected monthly expenditure, and make sure they have a realistic surplus amount saved to protect themselves against any future interest rate rises.”

Credit check

But there is an onus on clients too.

Ms Nelson suggests those who are unsure about their credit history can start by checking their credit score online, with many companies offering free reports.

“If there are any errors, contacting the relevant companies is a must, to correct the report and try to improve the credit score,” she explains. 

“Any mortgage seeker considering a credit impaired deal should seek advice from a financial adviser to see if it is financially viable to get such a deal, and whether it is the best choice for them.”

This is especially true for those with an adverse credit history as consumers tend to rely on searching the mortgage deals offered by the high-street lenders.

But it is, more often than not, the smaller specialist lenders and building societies who are offering a wider range of products for the credit impaired market.

Mr Torpey adds: “Consumers should be encouraged to look around and use a specialist mortgage broker to ensure they can secure the best possible mortgage deal and assess their application on a case-by-case basis.”

This means those potential borrowers who do not seek advice from a broker or financial adviser could be left believing there are no mortgage deals out there for them.

Beyond the banks

Jeremy Duncombe, currently director of the Legal & General Mortgage Club, acknowledges there is a significant amount of work to be done on educating clients generally. 

“Our latest research shows that over half of consumers are unaware that a mortgage broker can offer greater product choice than a bank or building society,” he warns. 

“It is therefore up to us to promote the benefits that brokers can offer. If we can encourage borrowers to speak to a mortgage broker about the different options on offer, we can ensure that they are getting the support of professional advice when making the biggest financial decision of their lives.”