Majority of brokers warn lenders are failing to keep pace with borrower needs

Nearly seven in ten mortgage brokers expected borrowers with non-standard financial circumstances to become the new normal, and 88% said lenders have been too slow to keep up.

According to new research from Nottingham Building Society published in The Doorstep Divide report, the survey of over 500 brokers found that 49% expected borrowers with non-standard circumstances to become the norm within the next 12 months. Almost a third (31%) believed that these borrowers are already the norm.

Nine in 10 believed lenders should prioritise products for a broader range of financial circumstances.

Brokers said viable complex income applications most often fail at the initial affordability assessment or over evidence and documentation (both 19%), while 18% said differing requirements between lenders were the biggest barrier to placing a case.

A separate consumer survey conducted among 2,000 UK adults showed the same gap from the borrowers’ side. Over half of those surveyed (58%) believed those with non-traditional incomes were judged more harshly than people in conventional salaried jobs, while 66% believed variable or irregular income was treated as higher risk and made it harder to secure a mortgage.

Some 60% of adults said a temporary difficult caused by illness, divorce or job loss should not count against an application with 69% wanting it to be easier to explain a change in circumstances to a lender.

Brokers agreed, with 89% saying lenders should give more weight to a borrower’s current stability than to a resolved historic credit issue.

More than three quarters of adults (77%) agreeing that someone who pays rent on time every month should be able to use this as evidence they can afford mortgage repayments and 59% saying it is unfair for little or no credit history to make a mortgage harder to obtain where someone has not missed payments or had financial problems.

However, just 27% of adults believed that the mortgage application process is a level playing field and only a quarter (25%) of respondents thought people with non-traditional incomes are treated fairly by lenders.

Nottingham Building Society is calling on lenders, brokers and policymakers to adapt the mortgage market to borrowers with less straightforward incomes and circumstances.

The building society has recommended standardising how complex income is evidenced, incorporating verified rental payment data into mortgage assessments and making it easier for borrowers to understand their options before applying.

Aaron Shinwell, chief lending officer at Nottingham Building Society, said: “Brokers and consumers are describing the same gap from different sides of the mortgage process.

“People want a fair chance to explain how they earn, what has changed and where they are now.

“Brokers need clarity about what evidence is required and confidence that a nuanced case will reach someone able to consider the full picture.

“No single lender can close this gap alone, which is why, as part of publishing this report, we’ve set out a clear roadmap for the mortgage industry to address it together.”

Sue Hayes, CEO at Nottingham Building Society said: "The mortgage market has changed, but too often lending criteria has not kept pace with modern day living.

“We believe that anyone with a workable route to homeownership deserves to be considered fairly.

“That's why we're bringing specialist expertise into mainstream lending and calling for a broader understanding of what a creditworthy customer looks like today."