One message has been repeated endlessly this year; that we’re all in this together. As long as you’re not trying to sort out a new mortgage that is.
While thousands of people are struggling to secure financial deals right now – often due to Covid-related economic circumstances beyond their control – a chosen few are basking in the warm glow of preferential treatment.
The newest deal from Swansea Building Society for example, not inappropriately on offer to the nation’s medical professionals, could allow successful applicants to borrow up to 5.5 times their annual income – significantly more than standard criteria allows.
The interest rate available would also normally only be offered to those earning in excess of £150,000 or applicants who don’t need to borrow more than 50 per cent of the property’s worth – the loan-to-value (LTV).
Instead, medics currently earning far less can now borrow up to 80 per cent LTV at the best rate the society offers.
Doctors, surgeons and dentists are obvious targets. The lender acknowledges that these professionals “will see a higher increased earning potential over the course of their career than the vast majority”.
The expectation is that this kind of profession-based selective lending will result in lower arrears as well as higher loan amounts taken – earning lenders more in interest.
“Professional mortgage products are aimed at borrowers who have started their career in a specific industry and are likely to see their income significantly increase once fully qualified. These include professions such as an accountant, architect, chartered surveyor, dentist, doctor, pilot, solicitor, or vet,” says Miles Robinson, head of mortgages at online mortgage broker Trussle.
“One of the key benefits of these products is that lenders frequently offer a mortgage based on the applicant’s projected salary, rather than their existing salary. This decision is based on the assumption that as the borrower’s chosen career progresses, their income will increase, thereby increasing their affordability.
“While monthly mortgage repayments might be a stretch initially, these mortgage products can prove a lifeline for young professionals looking to take that first step on the ladder.”
Mortgage provider Kensington has also developed a “hero” mortgage range specifically aimed at giving higher borrowing to those in key worker roles including armed forces personnel, firefighters, police officers, NHS clinicians including nurses and paramedics, and teachers in the public sector.
“The mortgage market has always developed products designed for a certain part of the market and/or to offer a slightly more flexible approach to criteria,” says David Hollingworth, a director at L&C Mortgages.
“Professionals have often been [a group] that has benefited from this approach and lenders like Scottish Widows Bank, Clydesdale and Metro Bank are lenders that can be more flexible for borrowers within certain professions.”
Other options include lenders that have long specialised in a certain sector. Teachers Building Society, for example, understands the requirements of teachers and could offer an option to those finding the mainstream lenders unable to consider their circumstances.
Many teachers will secure a job offer that may not start until the new school year but a specialist lender would know to appropriately take that into consideration rather than applying a ‘computer says no’ blanket approach.
“Of course some of these specialist options may come with slightly higher rates, so it makes sense to consider the whole market initially,” warns Hollingworth.
“However, this more tailored approach can have real benefits in giving more flexible outcomes.”
Like everyone else struggling to overcome, for example, the sudden inclusion of mortgage payment holidays in lenders’ risk assessments, borrowers who fit the bill may still have to demonstrate that they haven’t suffered a lasting financial impact from the pandemic.
Some, particularly the self-employed, may need to show more back up documentation than they are used to.
“The use of variable income sources has become more restricted but some lenders have shown flexibility to key workers,” adds Hollingworth.
“For example, Nationwide and Coventry building societies will not generally accept zero-hours contract income now but can make exceptions where they are from bank nurses, NHS locum, care workers and supermarket workers who are likely to have had ongoing solid hours during the pandemic.”
Elsewhere, the government’s Forces Help to Buy scheme can be invaluable for military personnel. Members of the army who have completed the prerequisite length of service, have six months left of service, and meet medical requirements can apply to borrow up to 50 per cent of their salary completely interest free.
“Set up as an equity loan which can be deducted in instalments from the borrower’s monthly income, this scheme can go a long way in supporting those in the army to purchase their own home, as building a large enough deposit can be an obstacle for many,” Robinson adds.
The deal can be used by first-time buyers as well as those relocating due to a new assignment or a move to support family needs.
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