Mr Affordability says: The new normal is complex, but tech can help

One particularly interesting case, which was first run in February was for a let-to-buy residential purchase at 65% LTV. It was a joint application, with employed applicants who earned joint income of £57,000 plus commission. They owed £6,000 on credit cards and had a monthly commitment of £412 on a car loan. As part of the let-to-buy process, the mortgage on their existing property was able to be covered by rental income. So, how did the results change over a six-week period?

In February, 25 lenders displayed affordability results on this case and the same was true when we repeated the process again in May. However, only 10 of the affordability results remained consistent. Nine of the affordability calculations carried out in May were lower than those in February, and six were higher! This included changes from the major lenders and a considerable in order of how much those lenders were willing to lend.

It’s very difficult to predict how the mortgage market will look in the near future as we emerge from the Covid-19 crisis, but one thing that appears clear is that it will be a more complicated landscape. We expect the rise of manual writing over automated decisioning and this will favour the increasing prominence of smaller lenders, with established processes in expertise in taking a more hands-on approach to assessing cases. As brokers are presented with more complex client scenarios, they are likely to work with smaller lenders more frequently.

Smaller lenders are, in general, more expensive than the large mainstream players. However, the consensus is that interest rates are likely to stay low for some time, so, whilst the average smaller lender's rates are often higher than the high street, they can still be competitive, especially when you consider the benefits of leveraging a more bespoke approach to affordability. Our research has shown a marked increase of smaller lenders entering the top 20 lenders for 75% LTV remortgage cases.

Working with smaller lenders is going to become increasingly important for brokers over the coming months and in response to this trend, MBT Affordability is integrating more smaller lenders into its affordability calculator. This makes it easier for advisers to work with a larger selection of lenders and understand where they stand from the affordability perspective.

The market is recovering following the shock of Covid-19, and there are plenty of opportunities for brokers and their clients, but there have also been a lot of changes, which will make it harder for brokers to negotiate the new landscape and put greater emphasis on using the right tools to deliver the best client outcomes.