High Street lenders not catering for today’s borrowers, survey suggests

Property investors in the UK are pessimistic about the mortgage loan market and reticent to use a broker as well as being fearful about being turned down, new research shows.

Some 81% of borrowers say they would prefer to make just one mortgage attempt, but only 44% say they would visit a broker despite one in three, 3.4 million, planning to look for another loan in the next 12 months. And 1.1 million borrowers are worried their credit record will hinder any application.

There is a need for mortgage brokers to actively target borrowers who are not being serviced by high street lenders, the survey from Legal & General Mortgage Club and the Association of Mortgage Intermediaries (AMI), also found.

The survey of 2,113 current borrowers, conducted by YouGov, reveals borrowers are anxious about the mortgage choices available to them, with only one in three of all borrowers very confident that they could get a new loan if they applied for one.
 
One in 10 are worried their credit record may be an issue, while 2.8 million, one in four, feel their income level is too low and 2.3 million, or one in five, believe they don't have enough deposit.

‘Many borrowers don't realise that chasing the headline rates that high street lenders advertise may lead them to making multiple attempts at securing a mortgage. At present, more than half of all borrowers say they would apply for a mortgage directly with a high street lender with the majority doing so purely because they have an existing relationship with one rather than because they knew they offered the most appropriate deals,’ said Ben Thompson, managing director of L&G Mortgage Club.

‘It's clear that borrowers would benefit from professional, impartial advice that will potentially open up a lot more financing options for them and brokers have a golden opportunity to tap into this part of the market,’ he added.

Analysis of the mortgage products available direct shows that many borrowers are likely to be disappointed by high street lenders. Some 34% of borrowers have a deposit of 10% or under, yet only 17% of current best buy products are available to these borrowers. The 2.3 million borrowers with deposits of 5% or less have only 2% of the market to choose from. In addition, interest rates at these LTV levels are the highest in the marketplace, averaging well over 5% APR.

When eligibility criteria such as income multiples are considered the choice for borrowers across the entire market is even narrower. The average household income in the UK is a little over £31,000 and the average target property purchase value is nearly £228,000, so for those with a 25% deposit, only a third of the products available on the high street would be appropriate. And for those with deposits of 15% or less, household income would have to be much higher than the UK average in order to secure a deal on the high-street at all.

‘There is a discernible gulf between the needs of many borrowers and the reality of what is being offered by high-street lenders. Such is the dearth in appropriate products that more people need better advice and a wider choice and this represents a vast pool of potential business for brokers,’ said Robert Sinclair, director of the Association of Mortgage Intermediaries.

‘Brokers need to educate the consumer and be more proactive if they are to turn this latent demand into new business. The mortgage market isn't suddenly going to spring back to pre-down turn levels so it's up to brokers to make the most of the opportunities out there,’ he added.