James Coney  

Lenders 'cannot be bothered' with difficult buyers

James Coney

James Coney

Mortgage lenders and estate agents have not had it as good as this for a decade or so.

Soaring numbers of homes are going for above their asking prices, and the number of property transactions continues to climb.

But you do wonder whether this buoyant market has created a perverse situation that has actually left many people unable to buy a home – and on top of this it has hardened the stance of lenders towards those with more fiddly incomes.

That makes life very tough indeed for brokers who are trying to do their best for their clients.

Bubbling markets allow lenders to cherry-pick only the very best customers, which is part of the reason why first-time buyers have been left out for so long.

They are just too high risk and take too much time, and so when the pandemic struck and service levels struggled, first-time buyers were the first customers to be abandoned. (That and lenders last summer were worried about a substantial fall in house prices).

Things have clearly improved since the introduced of the government's 95 per cent mortgage guarantee scheme, and it is encouraging to see that this has also sparked competition among companies not taking part.

But early reports suggest that as many as one in 20 hopeful buyers are being turned away before they can even receive a decision in principle.

And there also seems to be anecdotal evidence of lenders severely reducing the income multiples allowed for buyers with a less-than-perfect credit score.

Instead of 4.5 times income, they are being awarded as low as three times.

Frankly, after the year we have had I will be surprised if there are many first-time buyers who have not struggled with credit. I even heard of one young buyer penalised because they had taken the pragmatic decision to move back in with mum and dad.

Rather than seeing this as a pragmatic lifestyle choice for a person who did not want to live in a city for the convenience of being near an office they could no longer go in to, the lender judged it as a sign of financial hardship.

It is no wonder that so many young people are aggrieved that they are being turned down for mortgages where repayments would be lower or the same as their monthly rent.

This commonsense criticism is a clear sign that something is not working with affordability tests. 

Then there is the problem of the self-employed. As far as most lenders are concerned you either are or you are not, when in many cases workers have a mix of employed and self-employed income.

You can understand why lenders are cautious about the variability of self-employed income, but frankly, anyone who has managed to sustain their earnings during the past year should be viewed positively, not as someone who poses the risk that they could lose it all instantly.