Brokers tread gently with ‘soft footprints’ most ...

Brokers are searching for applications that will not leave a lasting mark on a client's credit score, new research from Knowledge Bank shows.

The results follow the announcement in April that NatWest would no longer produce a hard footprint for agreements in principle (AIP).

The criteria search specialist holds the largest database of up-to-date mortgage lending criteria in the UK and its monthly criteria index shows the terms that brokers are searching for.

In the residential market, ‘soft footprint at DIP stage’ was the most searched term by brokers, showing the growing importance of a good credit record. As purchases in the housing market become ever more competitive, house offers – or even viewings - are most likely to be accepted from those with an AIP or decision in principle (DIP).

The specialist says brokers may well be applying to a number of different lenders at the same time to ensure their client has the decision they need quickly, without it tarnishing their credit record. It also could be due to brokers working with clients with low credit scores, concerned that a rejection would impact future applications.

April was the first month in 2021 that ‘furloughed workers’ was not the most searched criteria in the residential arena. Criteria changes in this area have stabilised from almost daily changes at the start of the scheme, to almost none in the past month.

Although still in the top five, this suggests that brokers are either working with fewer clients on furlough, or that they now have a better understanding of the lenders that will lend to furloughed workers.

The buy-to-let market continues to garner interest from new landlords, with ‘first-time landlord’ and ‘first-time buyer’ both featuring in the top five most-searched criteria. ‘Lending to limited companies’ is also a constant in the most searched terms, featuring every month since the criteria index began in July 2018, with the tax benefits a clear attraction for landlords.

A new term featured in the five most searched terms in the equity release market; ‘medically enhanced lifetime mortgage’. These products are for those with medical conditions which give them shortened life expectancies. In these scenarios, lenders look to give lower rates or higher LTV on the equity release products.

In the bridging arena, ‘maximum loan to value’ and ‘regulated bridging’ were the top two searched terms, with the latter increasingly used as a result of buyers using bridging finance when a property chain has broken down, or to purchase a property at auction.

Commenting on the results, Matthew Corker, operations director at Knowledge Bank, says: “The soft footprint searches show brokers are treading carefully when making applications for clients. This might be as a result of the economic divide, with some clients struggling financially and wanting to avoid damaging their credit scores further.”

“It may also be due to the increase in buyers rushing to buy a property, and looking to secure a mortgage in principle quickly so they can make firm offers."

“The two-speed rental market is gathering momentum with continued interest from new landlords and even those new to the property market completely. Those looking to invest will probably be looking outside of the capital as rents outside of London continue to increase rapidly.”

He concludes: “With criteria changes continuing at a rapid pace, brokers could spend hours every day searching for the latest criteria, so using a comprehensive criteria search system can save them a massive amount of time and ensure they are providing the best advice.”