Delving deeper into the specialist residential market with Precise

This article was provided by Precise

Ian Scarrott, key relationship manager at Precise (part of OSB Group), reveals how the specialist residential lending space is evolving and what lenders can do to support brokers and their customers.

The UK has seen monumental changes over the past few years. How has this impacted the specialist housing market?

Huge events like these obviously create shockwaves throughout the economy. Rising interest rates, inflation and house prices have had a knock-on effect on housing, in terms of buyer demographics and affordability.

The rise in the number of people with blips on their credit record, or CCJs, means an increased need for lenders that have a more flexible approach to lending.

Since the pandemic, many people’s lives and financial circumstances have changes massively, so in turn brokers have reassessed the products and lenders they offer to clients to meet those changing needs.

The specialist mortgage market has had to be exceptionally resilient and adaptable and always remain one step ahead. But it has also proved to be a great time to seize opportunities for growth.

Have you had to adapt the products and services you offer your customers?

Soaring inflation and volatile interest rates have meant an increase in the number of people missing their payments or getting into financial difficulty.

Latest data from The Money Charity1 revealed that the average unsecured debt per household stood at £7,885 in Q4 2023, and 279 people a day were declared insolvent or bankrupt. Just over 41% of people reported difficulty paying their energy bills in this period, and food prices rose by an average of 26.2% in the two years to December 2023.

In Q1 2024, 279,785 CCJs were registered2 (an increase of 7% on the same quarter in 2023). Many of these customers may have been declined by a mainstream lender, remain unaware of specialist lenders’ criteria and think they can’t get a mortgage.

Customers who have experienced financial difficulties need their brokers to guide them now more than ever, and those brokers need to know which lenders they can trust to get their specialist cases over the line. 

Precise accepts a range of acceptable adverse for those who’ve experienced a credit blip and are now struggling to secure the mortgage they need with a mainstream lender. We’ll consider customers with up to five defaults and up to three unsatisfied CCJs in the last 24 months. We’ll also consider customers with one missed mortgage or secure loan payment in the last 12 months (three in 36 months worst status), as well as those with recently satisfied DMPs. Furthermore, we don’t count unsecured arrears, although these may affect a customer’s credit score.

We’ll consider 100% of secondary income in many scenarios, and we accept multiple income sources. So there are plenty of options there for those who find themselves worried about securing the mortgage they need.

First-time buyers have had a particularly hard time in getting on the housing ladder, how are you supporting them?

The end of Help to Buy has meant first-time buyers need alternative options, so we have always tried to have a range of different mortgages available, with varying interest rates and fees to choose from.

Through our sister company, Kent Reliance for Intermediaries, we also have the ability to offer high LTV purchase products (up to 95%), and we can be flexible with our income multiples. We’ll consider guarantors and joint borrower/sole proprietor arrangements. Not only that, but we can also offer shared ownership mortgages. This could be ideal, as customers can borrow up to 100% of the share value they’re purchasing, helping them to realise their homeownership ambitions at a more affordable cost. We’ll even consider sub-25% shares.

The growth in the number of self-employed workers has become a key feature of the labour market, but they are still facing barriers in getting a mortgage. Why is that?

There are currently around 4.25m self-employed people in the UK3 – a huge pool of potential customers, and this figure is set to continue to rise. Despite this, it’s an area that is incredibly underserved by the mainstream market – due to strict criteria requirements mainly around income and evidence of employment. However, this creates a huge opportunity for brokers to capitalise and gain traction in this specialist space.

What issues are customers like this facing with typical high street lenders?

Last year saw 100,000 more self-employed people added to that market and it’s a trend that’s expected to continue. Despite this, those with non-standard forms of income may be unable to find the funding they need from traditional lenders, due to strict restrictions around affordability criteria/income.

In fact, the latest research by IPSE4 found that over three-quarters (77%) of self-employed workers and freelancers were worried that getting a mortgage will be more difficult because of their self-employed status. The majority (70%) also said that certain lenders wouldn’t consider them because of their self-employed status.

How can specialist lenders help brokers find the right products for their self-employed customers?

Customers like this will look to their broker for specialist advice and help in getting them the mortgage they need. And this is where Precise comes in. We can offer more flexibility and take into account other forms of income, such as rental income, car allowance and pension contributions for the self-employed. We’ll also consider applications with only one year’s accounts and will use the latest year’s figures, rather than an average (which could be detrimental). In addition, we also consider changes in trading style, less-than-perfect credit histories, limited companies, sole traders and partnerships.

While being self-employed may mean having to provide more documentation, with the right lender, it doesn’t need to be a barrier to homeownership.

What benefits are there for brokers who may be hesitant to move into the specialist lending area of the market?

Customers can’t find their way to specialist lenders on their own. They need brokers that understand the market inside out and know immediately where to turn for those cases outside the norm. Helping customers who need them now will breed loyalty and help build relationships. It’s a great way to grow your business and your pipeline, and the new customers you gain now could be your prime residential customers down the line. 

What challenges are facing the specialist sector in the near future?

We face many obstacles still - the outcome of the General Election is something we’re all obviously waiting to see the impact of, and what effect the next party’s policies on housing in particular will have on the economy, interest rates and house prices.

We need to keep an eye on other lenders operating in the specialist space to make sure we’re staying competitive, and as much as possible remaining able to withstand and respond reactively to changes. 

FOR INTERMEDIARIES ONLY.

1. Money Trust statistics – January 2024 - https://themoneycharity.org.uk/media/January-2024-Money-Statistics.pdf
2. Registry Trust Q1 2024 statistics - https://www.registry-trust.org.uk/stats/q1-2024-statistics/
3. House of Commons UK labour market statistics – May 2024 - https://researchbriefings.files.parliament.uk/documents/CBP-9366/CBP-9366.pdf
4. IPSE research - Getting the self-employed on the property ladder - https://www.ipse.co.uk/asset/140BECC2%2D94CC%2D4B90%2D8F71A79B94E6C14D/