Earnings becoming ‘increasingly difficult to capture’

Saffron for Intermediaries has highlighted five common assumptions that it said are limiting brokers’ options, especially as the complexity of borrower circumstances increases.

It said brokers should challenge the five assumptions in order to place such cases more effectively.

1. Complex income does not necessarily mean weaker affordability

The company said the way many people earn is becoming increasingly difficult to capture through a single salary figure, pointing out that the same earnings on paper for two people can represent very different circumstances as to how it’s earned and how sustainable it is. It suggests the key question for brokers is how a lender will assess an income type and what evidence it will require.

2. An income multiple does not always tell the full affordability story

While loan-to-income ratios provide a straightforward way of assessing borrowing levels, they also don’t necessarily capture the full financial circumstances of every client, the company explained. For higher earners LTV ratios can provide a hard ceiling that doesn’t take account of their actual disposable income, it said.

3. An unusual property should not automatically mean an unusual risk

Unconventional properties, such as self-build projects, annexes, larger plots, HMOs, listed buildings and some forms of non-standard construction can also be difficult to finance, but the label attached to a property does not necessarily determine whether it is mortgageable, said Saffron. Instead, it said factors including condition, intended use, valuation and future marketability should also be considered.

4. Being a first-time buyer does not necessarily rule out buy-to-let

It also warned brokers not to make assumptions on the traditional landlord profile, pointing out that some prospective landlords may choose to invest before purchasing their own home, while others increasingly use limited company structures when building a portfolio, both routes that are considered unusual. Saffron said it was more important to understand the client’s circumstances, experience and plans rather than assuming that not already owning a home automatically closes the door.

5. International circumstances are becoming part of everyday mortgage advice

Brokers are increasingly likely to encounter clients whose circumstances cross borders, including British expats looking to purchase or refinance UK property, as well as foreign nationals living and working in the UK on visas. Such cases require additional checks, but individuals should be rejected for borrowing just because of their international status, the company said. It said the important thing for brokers is to establish the detail early; where somebody is based, their residency status, how they earn and what they are trying to achieve.

Lee Williams, national sales manager at Saffron for Intermediaries, said: “The mortgage market has spent years talking about ‘complex borrowers’, but in reality many of the circumstances that sit behind that label are becoming increasingly normal.

“That makes the conversation between broker and lender more important than ever. Ensuring that all of the information about the client’s case has been thoroughly collected, will help the adviser to apply different lenses to their circumstances to understand what the best outcome could be for their personal circumstances.”