Spread the word – opportunity is out there
Paul Adams (pictured) is sales director at Pepper Money
There are currently 150,000 homeowners trapped on high interest mortgages, who are unable to switch to a cheaper deal, according to the FCA.
The regulator says that around 30,000 of these people are with authorised mortgage lenders, while about 120,000 have mortgages held by non-regulated firms, which include some previous Northern Rock and Bradford & Bingley customers.
This is the number of official mortgage prisoners as identified by the regulator, but there are potentially many hundreds of thousands more borrowers who are mortgage prisoners by their own perception that they will be unable to secure another homeloan with a new lender.
For example, it is estimated nearly half a million people have a self-cert mortgage and may be unaware of the alternative options for self-employed or contractor borrowers now that the product is no longer available.
So, there is huge potential for advisers to grow their client base and provide freedom to borrowers who consider themselves to be mortgage prisoners, by raising awareness of the multitude of mortgage options in their local area.
National Conversation Week, which takes place from 18th to 24th March, provides a great opportunity for advisers to do just this. The themed week is intended to promote all forms of dialogue, but it does have a particular focus on conversations about finances, encouraging people to be more open to discussing ways to improve their financial health.
National Conversation Week provides a great excuse for you to stimulate new business, speak to potential clients who have never thought about talking to a mortgage broker, and maybe even help you to free a few mortgage prisoners.
So, what hooks can you use to engage new clients? Here are some tips you can use to spread the word that opportunity is out there.
Was the last mortgage you took on a self-cert basis? There could be another way to prove your income
Lenders have become much more advanced in dealing with self-employed income and whereas it used to be the case of a lender averaging salary and dividends taken over the last three years, decisions can now be based on the last 12 months’ accounts and lenders are open to additional allowable income considerations, such as expenses add-backs, directors’ car allowance, directors’ pension contributions, use of home as office and private health insurance.
Similarly, as lender have improved their offering for self-employed customers, they are much more flexible about the type of contract, time left on contracts and time between contracts. Income is typically calculated on current daily rate x five to give a weekly rate and then multiplied by 46 to provide an annual income that allows time for holidays and time off.
Multiple income sources
Self-cert was handy for lots of borrowers as they could lump all of their earnings in together as a nice round number, but there are other ways for lenders to consider different sources of income and lenders can individually assess an applicant’s circumstances to ensure they account for all of their earned income.
Did you know that you can still access competitively priced mortgages even if you have recently experienced credit problems?
CCJs and defaults
Lots of borrowers still believe that a recent or unsatisfied CCJ or default on their record will prevent them from being able to get a new mortgage, but lenders are increasingly able to offer competitive deals to customers with CCJs and defaults in the last year, even if they are unsatisfied.
Low credit score
You are very likely to encounter potential clients who have tried a high street lender, failed a credit score and now written off their chances of accessing the market, so there’s opportunity to make it clear that not all lenders use credit scores to make decisions and there are many choices from lenders that underwrite people as individuals, taking into account all of their circumstances.
Debt Management Plan
Being in an active Debt Management Plan (DMP) also doesn’t have to prevent your potential clients from getting a mortgage. As look as the plan has been in place for a period of time and is well maintained, there are options for customers who are still in a DMP.
It’s also worth noting that buy to let landlords can have credit problems too and there are lenders that recognise this and provide suitable mortgages for property investors in this position.
So, don’t let your potential clients imprison themselves because of their fears of being turned down for a mortgage. This National Conversation Week take the opportunity to spread the word and talk about the many and varied opportunities there are in the mortgage market for people with different circumstances to access competitive funding and find a new homeloan.