It’s fair to say that, from an operational process, the past 12 to 18 months have been far from easy for all lenders, and business volumes have diminished in line with a rising interest rate environment, mounting living costs and inflationary pressure.
Across the mortgage market, there has been a clear requirement for lenders to ramp up their communications, support and service standards during this highly unpredictable period. This is especially evident following a succession of rate increases, which led to many borrowers feeling uncertain about the impact on their mortgage payments, uncertainty which has also affected business volumes.
This was evident in the latest Money and Credit statistics from the Bank of England which showed that net borrowing of mortgage debt by individuals decreased from £1.1bn in August to -£0.9bn in September. Gross lending also fell from £19.4bn in August to £18.6bn in September, while net approvals for house purchases dropped from 45,400 to 43,300, the lowest level since January 2023 (39,900). In addition, net approvals for remortgaging continued to decline from 25,100 in August to 20,600 in September, the lowest level since January 1999 (18,300).
From a mortgage advice standpoint, we fully appreciate that recent lending conditions have resulted in some tough client conversations surrounding present and future borrowing requirements and the level of difficulty in servicing these ever-shifting needs amidst such turbulent times has really ramped up.
Education has become even more paramount within this relationship due to a host of complex economic factors and turbulent market forces. From speaking to our intermediary partners, affordability issues are dominating many of these conversations but another area which has become increasingly common is around credit and credit scores. By this I mean, how to improve them and, as importantly, how to safeguard them as this remains a grey area for many.
From a lending perspective, we obviously need to gauge the creditworthiness of each and every borrower. Historically, for various reasons, we have been in favour of a hard credit check but now – thanks to intermediary feedback and in a bid to enhance our customer experience – we’ve totally revamped the way we complete our Decision in Principle by moving from hard to soft credit checks.
It’s also important to recognise that a one-size-fits-all approach does not support the needs of all borrowers, or all intermediary partners for that matter. To meet more of these borrowing needs, we recently made enhancements to our loan-to-income (LTI) policy, increasing the loan multiples for higher income earners.
We’ve also began the process of rebuilding our mortgage application systems. This digital transformation will involve ongoing development and I’m sure this will prove to be an eye-opening experience from a service and delivery perspective for everyone involved.
Looking ahead, as the value of the advice process becomes even greater, so too must the emphasis from lenders to arm the intermediary market with the products, criteria and policy to better serve and protect their clients ever-shifting needs. As we transition to a new interest rate norm, we are also tasked with improving the mortgage journey – where possible – to help attract more business in an economic environment which is inevitably raising some barriers of entry. And the closer lenders and intermediaries can work together to overcome these ongoing challenges, the lower these barriers will become.
Sian McIntyre is head of acquisitions and engagement at Barclays
