How headroom can improve your conversions

This can happen for a number of reasons – perhaps the credit search has unearthed missed payments that had previously been undisclosed, or maybe assessment of the client’s bank statements has revealed some inconsistencies that the lender doesn’t like.

It’s an unsatisfying situation for all involved. As a broker, your time has been wasted, as has your client’s time, and may well find yourself in a position where you are racing the clock to find an alternative. Similarly, lenders do not like to expend time and resource on cases that do not proceed to completion. Yet, it still happens and there is nothing that you can do about it – or is there?

You will probably never be able to achieve 100% conversion on your applications, but you could potentially improve your conversion rate by giving yourself, and your client, some more headroom.

The closer a case sits to the lending limits of a lender, the more likely it is that a hurdle during the process could derail the entire application. Whereas, if a case sits more comfortably within a lender’s appetite, there is a better chance that the lender will be able to be more accommodating to blips that are uncovered further down the line.

For example, say your client wants to borrow £250,000. You know that lender A will be able to lend them £252,000 and so submit the application. Complications are discovered during the process, however, and the lender either rejects the application because it is already at the edge of its risk appetite on loan size or reduces the amount it is happy to lend to a total that is less than the client requires.

In this situation, if you choose to shop around, you may find that lender B is happy to advance £300,000, which means that your client’s requirements sit more comfortably within the lender’s risk appetite. Consequently, if issues are discovered further down the line, the lender may be less inclined to decline the case and even if it reduced the loan amount it is willing to advance, it could still meet with the client’s requirements.

So, in opting for a lender that provides your client with more headroom, you could achieve a completion where you might have otherwise suffered a rejection.

Researching the market for lenders that can provide your clients with more headroom could therefore help to improve your conversions. And tools like MBT Affordability, which can check affordability calculations across all major lenders using just one form, can make this research quick and easy.

So, next time you get frustrated about a declined case, think about how a bit of headroom could help to improve your conversions.