Residential  

Lending criteria changes problematic for brokers

Lending criteria changes problematic for brokers

The multitude of updates to mortgage lending criteria during the coronavirus has created challenges for brokers and clients alike, as revisions in response to the pandemic have resulted in clients no longer qualifying for borrowing with certain lenders.

Data provided to FTAdviser by mortgage criteria search system Knowledge Bank shows the number of changes to lending criteria increased significantly year on year.

In the month of June there were a total of 746 changes to residential lending criteria, compared with 390 in the same month last year.

The number of changes to criteria in the buy-to-let sector also increased, from 146 in June last year to 393 in June 2020.

Matthew Corker, lender relationship manager at Knowledge Bank, said changes to criteria had been “impossible” for brokers to keep up with at the beginning of lockdown.

While Knowledge Bank has added lenders and criteria categories to its system, it said the additions should not have made more than a 20 per cent difference in any comparison between the two years.

Total number of changes to criteria

 RESIDENTIALBUY-TO-LET
 20192020Change20192020Change
March185456146%6910601436%
April352963174%12616833%
May36362973%259875238%
June39074691%146393169%
July2380248%17109541%

Kat Tymon, director at Mansfield Money, agreed changes as a result of the coronavirus had been coming “thick and fast”.

Ms Tymon said: “Each lender has a different approach to the pandemic and brokers have learnt to take each day as it comes,” adding that brokers who adapt quickly to market conditions would “survive this historic event”.

Greg Cunnington, director of lender relationships and new homes at Alexander Hall, said there was “no doubt” that keeping on top of criteria changes since March had been challenging.

Mr Cunnington added: “There were periods in April and May where the volume of changes daily was more than you would normally see in a month”.

Changes to income assessments

Anthony Rose, director at LDNfinance, recounted a case of a lender that originally would have accepted a self-employed client’s most recent yearly figures, to take advantage of their improved business performance.

However, Mr Rose said the lender subsequently changed its position to calculating an average of the past two years, which meant the case was no longer able to proceed.

Additionally, Alexander Hall’s Mr Cunnington said changes to criteria, such as a lender no longer accepting 100 per cent of commission income, meant some clients with mortgages agreed before lockdown were informed that they were no longer available.

Nationwide, for example, stopped accepting bonus, overtime and commission income on any new applications from April 2 as a result of the coronavirus. However, the building society said it could consider using overtime income for key workers whose earnings had not been affected by “recent developments around coronavirus”.

Earlier this month, Nationwide had been one of a small handful of lenders that announced they will resume offering products at 90 per cent amid a “more active housing market”.

At the time, Nationwide Building Society said it would increase in the lending limit to 90 per cent LTV for first-time buyers from July 20, with no set limit on the number of home loans available.