Borrowers are requiring more flexibility from lenders due to the effects of the pandemic but this is often not met, brokers have warned.
Alex Kemp, partner at Ideal Mortgage Advisers, said he had seen more clients require flexible lending criteria over the past few months, who ended up battling 'stricter' lending requirements.
He said: “We’ve seen a lot of people working reduced hours, or on reduced pay to either avoid being furloughed, or to assist with childcare and homeschooling.
“We’re actually seeing that mortgage lenders are acting stricter and stricter with any additional income such as bonuses, commission or overtime and most aren’t accepting any additional income that isn’t paid on a monthly basis, or in some circumstances they will only accept additional income for key workers only.”
In a survey from Masthaven Bank in November, of 265 intermediaries within the specialist lending industry, 79 per cent said flexible lending criteria was now a bigger priority for customers than before the start of the pandemic, while 92 per cent said their customers had been negatively financially impacted by the pandemic in the second half of 2020.
Adam Wells, director at Lloyd Wells Mortgages, agreed.
He said: “For self-employed applicants, it can be a real struggle. I have a few clients with businesses that have thrived due to lockdown and are being hampered due to the extra underwriting.”
Dominik Lipnicki, director at Your Mortgage Decisions, said advisers would “always hope that greater flexibility would be forthcoming from lenders”.
But Lipnicki added: “Our experience has been a little more negative, with many lenders only wanting clients who have been unaffected by the pandemic.”
Kate Davies, executive director at IMLA, said lenders were eager to support new customers where possible, but that their decision to take a closer look at borrowers’ circumstances was ultimately part of their commitment to existing regulatory requirements.
She added: “It’s important to remember that there is still a strong specialist lending sector that is focused on supporting customers with more complex credit histories and incomes.
“Many of these lenders provide options for so-called ‘non-standard’ borrowers, some of whom may need to rebuild their credit profiles and others whose circumstances may just have become more complicated in the light of the Covid-19 crisis.
“Intermediaries have a huge role to play in advising these customers and the specialist sector is likely to play a big part in supporting them.”
Masthaven Bank's research found a quarter (26 per cent) of brokers expected to see more business this year from borrowers who have been financially impacted by the pandemic, such as taking out a mortgage payment deferral or being furloughed.
Additionally, one in five brokers (20 per cent) said they expected to see more business from borrowers with an impaired credit history.
Another specialist lender, Bluestone Mortgages, said it was continuing to see “unprecedented” demand from borrowers seeking tailored lending solutions amid the pandemic.