Look Before you Leap!

The mortgage market remains turbulent, with increased competition, and pressures on borrower spending. Over the last two years, the market has seen interest rates and inflation rising leaving pressure on both the market and borrowers. While we are now looking towards a more positive outlook with a continued reduction in inflation, stabilisation of interest rates and the potential of a bank base rate reduction, it’s important to remember the effect the past 24 months may have had on borrowers’ credit profiles. Based on this alone, a wider number of borrowers could be more likely to need a personalised approach to their mortgage applications. While many jump straight from the high street to a specialist lender, regional building societies like the Tipton are well suited to fill the gap and meet the needs of clients that fall between these two types of lenders.

All lenders have a role to play, with the high street working to support the majority of the market in achieving lower interest rates at speed, and specialist lenders providing lending options to borrowers who don’t fit inside the standard box. Carrying characteristics of both, the regional building society sector can often support niche areas of lending, at a lower risk and therefore lower cost than specialist lenders. This allows Society’s to easily bridge the gap between high street and specialist.

Unlike high street lenders, many regional building societies do not operate computer-based decision-making systems, giving a yes or no answer based on a borrower’s credit score. Instead, they can offer a greater flexibility to borrowers through manual underwriting processes, where cases are assessed on the strength of the overall covenant.

These processes can mean regional societies ask a few more questions, however the personalised manner of underwriting allows for each application to be assessed on its individual merits. This could prove imperative for borrower’s who need a common-sense approach rather than a quick computer decision making system. Manual underwriting allows Societies to take a view on the personal situation of each borrower and assess risk on a personalised basis, giving much more potential to support those who have seen a change in circumstances due to the challenging environment we have all found ourselves in. Whilst this is a service specialist lenders can provide, the middle ground occupied by regional building societies, will likely – mean terms are more favourable due to the reduced level of risk accepted.

Regional building societies are also known for their niche criteria and mortgage propositions. From zero-hour contracts to clients working within probationary periods, or specific self-employed applicant criteria. This approach is likely to prove valuable for borrowers who don’t have a standard contract of employment or may have sought out new career opportunities in recent years.

So, how can this support borrowers? With much-anticipated interest rate decreases on the horizon, it will be important for advisers and lenders alike to work together to understand the changing needs of our customers and provide a lending solution that works to support them. With all lenders playing a role in the market, it’s important brokers  look before they leap as building societies are working hard to bridge the gap between high street and specialist lenders.