Top five residential criteria searches

1. Age Limits: Maximum Age at End of Mortgage Term

2. Age Limits: Maximum Age at Term End Without Pension Proof (Maximum retirement age)

The two most searched for criteria both relate to an applicant’s age. According to recent research, 2022 is likely to see a 39% rise in mortgages with terms of 35 years or more being sold to people aged over 40[1], and current volumes being the highest for a decade.

The research suggests that rising house prices and attempts by borrowers to lower monthly repayments due to the current economic climate are the main reasons for the spike in lending into retirement, but they point out that this strategy could seriously affect quality of life for older borrowers.

Other factors driving the increase include[2]:

• An ageing population – ONS data shows the number of adults aged 55 and over is set to rise 13% by 2030.
• Over 50s still want to borrow – over £28bn was lent to over 50s in 2021, the highest volume to that age bracket since 2014.
• Working beyond retirement – ONS data shows employment rates doubled for the over 65s between 1993 and 2018.

Maybe these are reasons why a poll of 100 brokers by lender, United Trust Bank, found that more than 90% expect to see niche products like lending into retirement continuing to grow in popularity, with the specialist lending sector set to increase by 20%[3].

3. Employment: Minimum length of time in current job (months)

Times are hard. Households are feeling the pinch and so many borrowers are looking for more lucrative employment. But that can make finding a mortgage harder with many lenders requiring two years of employment history. However, that approach showed signs of softening last year with lenders becoming more flexible and being willing to lend to borrowers still in their probationary period, albeit with checks on length of time in the industry and confirmation of previous earnings[4].

Of course, for borrowers a situation like this is where utilising the expertise of a broker can pay dividends, and shopping around becomes easier. With proof of a solid work history in previous employment in the same industry, and with evidence the new contract will be permanent, it should be possible to find a mortgage for a borrower having been in the job for less than three months.

The pandemic was a driver for people changing their careers and looking for new opportunities, and that still seems to be the case. A study of 6,000 UK workers by CIPD Good Work index discovered 20% intend to find a new job within the next year, and of those 23% would like a different type of work for better pay and benefits, improved job satisfaction, or a preferable work-life balance[5].

4. Interest only: Sale of mortgaged property

With Interest Only being fourth in our list of most searched for criteria in the past three months in Criteria Brain, could this mean there is a growing demand for retirement interest only (RIO) mortgages? After all, as we know, these products are only available to those over 55, and it’s an ageing population. Why would they want an RIO mortgage? For several reasons:

• To buy a property better suited to their needs during retirement
• To top up their pension pot by releasing cash from their property
• To gift money to family members

Back in January 2022, data from the Financial Conduct Authority showed that Q3 of 2021 saw a 97.2% increase in this type of product being sold, compared to Q3 2020. However, they went on to point out that the 2021 figure was still only 0.22% of the 341,227 mortgages sold[6].

Mortgage Brain data shows a total of 6,093 searches on this specific criteria over the last three months, that’s 1.8% of total searches, with that figure in an upward trend.

Hodge Bank have reported a 41% increase in their RIO book between January and August this year, compared to the same period in 2021, and point out that the reasons for taking these products seem to have changed with home improvement and debt consolidation no longer the bigger drivers[7].

It’s possible we are also seeing a trend for older borrowers coming to the end of an interest-only mortgage, but finding that due to the economic climate they are not able to repay the capital. That means a need to downsize or sell up unless they can remortgage.

An area of the market worth keeping an eye on perhaps.

5. Self-employed: Latest years self-employed figures for affordability.

There are 4.2 million self-employed workers in the UK as of early in 2022[8]. Many will be finding that getting a mortgage means jumping through a lot more hoops than if they were employed. Traditionally, lenders ask for proof of earnings from the last two years, and understandably so as self-employed income can be unpredictable, and that was even more so during the pandemic. This caused lenders to tighten their criteria.

However, following the pandemic with its lockdowns and furlough schemes, the more complex cases are becoming the norm and there are signs some lenders are willing to relax their criteria to retain customers.

Indeed, a quick search of this criteria on our Criteria Brain platform shows that although on the face of it a self-employed case with just the latest year’s figures available may be hard to place, in fact 37 lenders will accept this.

No more ‘vanilla’ cases

All the criteria above could be associated with the more complex cases that brokers find themselves having to deal with in today’s market. The days of the so-called ‘vanilla’ case are long gone. That means brokers need to work harder and spend more time checking lenders criteria, talking to BDMs, and scouring lender websites.

Mortgage Brain technology means there is a quicker way to place RIO, self-employed, and probationary cases. Criteria Brain is simple to use and can search up to six criteria at a time. And in these uncertain days where products change quickly, you can always be sure information is accurate as lenders verify it themselves.

If you’ve not yet test-driven Criteria Brain, contact us for a free 30-day trial.