As government schemes are withdrawn, borrowers will need more support than ever
Steve Seal is managing director of Bluestone Mortgages
We stand here today hoping the worst of the coronavirus pandemic is behind us.
But even though vaccines have allowed us to see the light at the end of the tunnel, the financial repercussions of the COVID-19 crisis will be felt for years to come.
The government launched several support schemes to help workers and businesses through the pandemic, but they will soon be removed and thousands of consumers will have to adapt to the new normal.
The furlough scheme has helped millions of people stay in their jobs during the last year, but many of these workers have seen their incomes fall substantially.
They are in a much worse position than before the pandemic and this will have huge repercussions on all aspects of their financial lives.
As well as struggling to meet day-to-day spending, some homeowners could be at a significant disadvantage when they come to move house or switch mortgages.
High street banks have already tightened their affordability checks and this will mean that, for many borrowers who have been financially impacted by the pandemic, they could struggle to take out a mainstream loan.
Likewise, those who are looking to purchase their first home have also seen their options heavily restricted.
Even if they have a sufficient deposit and can demonstrate that they are able to meet the monthly repayments, the “computer says no” approach employed by many mainstream lenders may prevent them from securing a mortgage if they have been financially impacted by the crisis.
Credit profiles are changing rapidly and with 4.8 million people still on furlough, according to government figures, these workers cannot be left behind.
Specialist lenders, who deal with clients from a wide range of financial backgrounds, can take a much more considered approach and look beyond the headline figures when assessing borrowers for financing.
But this is not just an issue that affects full-time employees; self-employed workers and small business owners have also suffered problems since the COVID-19 crisis began.
They have been supported by government loans and grants, but these schemes will also be withdrawn soon and workers will have to quickly adapt.
This could be a huge upheaval given 2.2 million self-employed people claimed from the most recent government funding pot.
There is a great opportunity for brokers to provide truly holistic advice for their clients.
During a turbulent financial time like this, an adviser can be the difference between someone struggling with their current mortgage terms or finding a more suitable deal elsewhere, such as via a specialist lender.
But brokers may need to look past the traditional lenders to find a home for their client’s case, especially if they have suffered financial hardship during the crisis.
As such, a specialist solution could be the perfect option for those who have previously taken a financial hit.
Specialist lenders also have their part to play, and will need to ensure they are engaged with the adviser community and able to create new products that fit buyers’ needs.
Historic County Court Judgements (CCJs) can still lead to perfectly reasonable mortgage applications being turned down.
Likewise, workers who turned to government schemes in their hour of need should not be disenfranchised from lending either, particularly if they have already recovered from a short-term income hit.
Non-standard mortgage applications will be a huge growth area in 2021 and beyond, as a growing cohort of borrowers are likely to benefit from personalised solutions rather than a tick box approach.
The Help-to-Buy scheme will also open more doors for the specialist market, given the number of younger borrowers who will emerge from the pandemic in a less financially stable position than they were before the pandemic and could be looking to take advantage of government support to help them onto the property ladder.
Support from specialist lenders and advisers will be particularly crucial for first-time buyer couples who are looking to use Help-to-Buy but have a history of poor or adverse credit considering the recent changes to the scheme.
My message to the industry is, ‘gear up now’. For both lenders and advisers, there is a real opportunity to capitalise on the growth in demand for specialist lending over the coming years, and to this end, the industry needs to make sure it is ready to serve “non-vanilla” customers.