Nearly seven in 10 (68%) mortgage brokers expect borrowers with non-standard financial circumstances to become the new normal, and 88% say lenders have been too slow to keep up, Nottingham Building Society research reveals.
A survey, published in a report by the society, found that 31% already see these borrowers with non-standard circumstances as the ‘norm’, with a further 49% expecting that within the next 12 months.
Nine in 10 (90%) believe lenders should prioritise products for a broader range of financial circumstances.
Viable complex income applications most often fail at the initial affordability assessment or over evidence and documentation (both 19%), while 18% say differing requirements between lenders are the single biggest barrier to placing a case.
A separate consumer survey shows the same gap from the borrowers’ side.
Over half of those surveyed (58%) believe those with non-traditional incomes are judged more harshly than people in conventional salaried jobs, while 66% believe variable or irregular income is treated as higher risk and makes it harder to secure a mortgage.
For consumers, the widening gap can affect decisions before an application reaches a lender.
More than a quarter of adults (27%) said they had delayed, paused, dropped out of or decided against applying for a mortgage because of their income type or pattern. The figure rises to 49% among self-employed respondents.
Life events and past setbacks also remain a key part of the picture, with 60% of adults saying a temporary difficulty caused by illness, divorce or job loss should not count against an application, and 69% wanting it to be easier to explain a change in circumstances to a lender.
Brokers agree, with 89% saying lenders should give more weight to a borrower’s current stability than to a resolved historic credit issue.
There is strong public support for a broader view of creditworthiness from lenders, with more than three quarters of adults (77%) agreeing that someone who pays rent on time every month should be able to use this as evidence they can afford mortgage repayments.
Of respondents, 59% saying it is unfair for little or no credit history to make a mortgage harder to obtain where someone has not missed payments or had financial problems.
However, just 27% of adults believe that the mortgage application process is a level playing field and 25% of respondents think people with non-traditional incomes are treated fairly by lenders.
Nottingham Building Society chief executive Sue Hayes says: “The mortgage market has changed, but too often lending criteria has not kept pace with modern day living. Life events such as divorce, bereavement, illness or changing careers are now part of many people’s stories, yet borrowers in these circumstances can still find themselves overlooked.”
“As a mutual, our role is to look beyond the labels and understand the person behind the application. We believe that anyone with a workable route to homeownership deserves to be considered fairly.”
“That’s why we’re bringing specialist expertise into mainstream lending and calling for a broader understanding of what a creditworthy customer looks like today.”
