‘Vanilla' mortgage cases disappearing as complexity rises

‘Vanilla' mortgage cases disappearing as complexity rises

Mortgage applications are becoming increasingly complicated across the board, with the majority of brokers (86 per cent) saying the affordability aspect has become “more complex than ever” due to lenders “applying so many different rules”.

Assessment of affordability is the starting point for many advisers’ client conversations. ‘How much can I borrow’ is one of the most searched mortgage related terms on Google, according to adviser research portal Mortgage Broker Tools’ (MBT) affordability report which was published today (April 5).

“What jumped out is the amount of cases brokers are putting through affordability platforms,” Tanya Toumadj, MBT’s chief executive, told FTAdviser.

Out of 425 brokers surveyed, 42.5 per cent said they use an affordability system for all their cases, and a further 27 per cent said they do for at least two thirds of cases.

“A lot of brokers use affordability systems for all their cases, and this idea about a ‘vanilla, straight forward case’ doesn’t really exist anymore because lenders are changing their rules so regularly.

“In the pandemic, they [lenders] were extracting out, and now they’re expanding in. And with inflation, a lot of lenders are changing their ONS [Office for National Statistics] figures in the background in their affordability calculators.

“So even what seemed like a bog standard case is now going through an affordability platform. To me, that really stood out. We thought it would be more edge cases.”

Martin Stewart, a director at The Money Group, said brokers doing their own affordability checks “is a fundamental part” of what mortgage advisers do. “We’re saving clients from themselves,” he said.

Stewart had one case which he later tweeted about where he said he “talked a client out of a let-to-buy” where the lender had suggested the client commit 12 times income of aggregate finance. He said such a mortgage “could have put his family at risk”.

In MBT’s report, it said the market expects more lenders embedding affordability into their thinking too, particularly when it comes to product design.

The majority of brokers (88 per cent) said they either always or sometimes double-checked results on lender websites.

And while affordability becoming more tricky could be seen as a good thing, because it means more advisers are searching whole of market, it has also seriously slowed brokers down.

“It is taking longer to be thorough as a broker, which can sometimes mean they don’t have time to try new areas - such as new tech - and the market hasn’t slowed down either,” said Toumadj.

“Brokers are extremely busy, making them more reliant on technology. But a lot of brokers don’t have time to implement technology.”