Liquidity and profitability are critical to a lender and, as I’ve said many times before, for someone looking at their money the same objective applies. So, with residential mortgages the most significant asset on a lenders’ balance sheet what happens when that person’s online re-mortgage, mortgage, or BTL mortgage application comes to nought when going through underwriting after a promising LTV (loan to value) and DIP (decision-in-principle) was churned out, or is later declined because the property doesn’t match lender criteria? What happens to the person who realises that a small percentage shaved off their interest rate could have been a lot of money in their pocket? And what of those with complex financial situations, irregular incomes, low income, little evidence of income, credit impairment, adverse credit, low credit scores, who think they are ineligible to a solution?
The money market is a fragile system and the cogs that keep it turning rarely align. To counterbalance the inevitable bumpy cog-turning, lenders act decisively and adapt through strategic action. Some go as far as breaking away from their model to create a more pragmatic, flexible approach. These lenders re-consider the applications being put to them by those who’ve had a tailspin from the cog fallout. Hence, as the money markets are ever changing so are lender products and criteria, which creates hidden pockets.
The recent spate of cheap deals was made available for those using proportionately bigger deposit amounts, having healthy and sufficient income and a clean credit history. An affordability assessment standard that is rare and made even rarer by financial impact from the pandemic; employee markets, furlough, SEISS, BBL and even business grants have each added stress to the landscape. Variants which can add to a heavy sense of being stuck in a rut that pervades along with frustration for those turned down for a mortgage or loan and swiftly joins forces for those who realise their money has been leaching a small percentage or fee at a time unnecessarily into an ivory-towered corporate profit bank. Demoralising.
With predictions for Bank of England Base Rate increasestarting softly somewhere between 0.15% and 0.5% and the Bank committee having said the “market-implied path” for the bank rate would see it rise to around 1 per cent by the end of 2022.
Although I try to be a broadly speaking optimist, with current mortgage offerings already starting to price in an increase to base rate, any specific increase, when it happens, will be the starting gun for lender rate increases across the board. So, it’s always worth checking the pockets for both those who are looking to ratchet-up savings but can’t find them amongst the typical online listed fare, and those who think they are ineligible to a solution. A second opinion might fit the bill.