The effect of the global pandemic has been incredibly varied according to industry. Certain sectors, such as catering and hospitality, have been absolutely devastated and the effects have ricocheted across the mortgage market. Across the board, most lenders have become more cautious and forensic in their approach, even though plenty of industries remain relatively unaffected and some have, in fact, flourished during the crisis. Our Associate Director Caroline Burke gives us a picture of the current and future trends in the self-employed mortgage market…
How has the self-employed mortgage market been affected by Coronavirus?
Lenders have generally applied changes unilaterally and cases which were once considered straightforward are no longer thought of in the same terms. For instance, lenders used to be happy to work on self-employed income projections, but that’s generally no longer the case. They are also taking a forensic approach to incomes pre and post COVID to identify the potential effect the pandemic has had on the individual and their business. Most lenders have applied reductions to their loan to value (LTV) ratios and, in general, applications from self-employed individuals are being manually underwritten, meaning that an individual looks at every single case.
What do self-employed clients need to know when making a mortgage application?
As a result of this forensic approach and high levels of activity in the property market, applications have been taking much longer to process. Some lenders now caution that it could take 20 working days before paperwork will be checked by an underwriter. Compare this with Q1 of 2020, when it was common for a mortgage offer to be received within a three-week period. This makes it even more vital that the paperwork is correct and properly presented when it does eventually go in front of the eyes of a decision maker. Having a specialist mortgage adviser on your side is incredibly helpful in this regard.
What do we expect to see in coming weeks and months?
We expect the application backlog to take a couple of months to clear for some lenders. Meantime, lenders have taken measures to help themselves which include restricting products from the market to help staff – many of whom have been working from home – to catch up. We are starting to see signs of recovery, with some high loan-to-value products being relaunched.
How has the private bank sector been affected by Coronavirus?
It’s quite a different story here and private bank teams seem to have managed to keep up to date with demand. Therefore, it can be a quicker route for clients who fit the right profile. Many private banks do require separate legal representation, meaning the private bank will appoint a firm of solicitors to act on behalf of the bank, and the applicant will appoint their own solicitor to act on their behalf. Due to the current volume of applications being processed, it’s important to allow sufficient time for your legal work to be completed. We can help by identifying which private banks to approach if your application is time sensitive, and can also identify which banks will allow an applicant’s solicitor to act for both parties.
If you’re self-employed and looking for a mortgage, speak to the experts in large and specialist lending. We can help to assess your potential application and present it in the correct way, using expertise gained over several decades of helping entrepreneurs to secure lending fitting to their needs.