Constancy in a changing world revealed by Knowledge Bank's Criteria Index

26 September 2023

In a world that is constantly changing, the searches for mortgage criteria that brokers have been carrying out on behalf of their clients have remained remarkably constant.

With Bank of England base rate now on hold, the world of mortgages seems to have settled into a holding pattern with few changes across the residential sector, buy-to-let, bridging or commercial. The issues of affordability for mortgage holders however, unfortunately also remain the same.

The most popular searches remain those demonstrating people struggling to reduce payments, with the top searches centring around ‘maximum age at the end of term’ and ‘missed or late payments’. A person’s employment situation is of increasing relevance with ‘time in current employment’ and ‘maximum age at end of term using employed income only’ featuring as the third and fourth most searched items. The need for someone to be employed and in a stable job seems to be a real feature. Searches for self-employed borrowers haven’t featured in the top five since June, indicating perhaps that the self-employed are sitting tight as not remortgaging at this point in time or maybe taking product transfers when offered.

For those topping up their home loan with a second charge mortgage, there was definitely a theme of people maxing out. Three of the top four searches were: ‘maximum LTV / Loan to Value’, ‘maximum loan amount’ and ‘maximum age at end of term’, topping out, once again with ‘time in current employment’ the same as in the first charge searches.

All of this is a snapshot into a populace clearly being stretched and finding anyway they can to minimise mortgage payments either by lengthening their mortgage term, stretching what they can borrow or, in some cases, looking at how they can maintain their mortgage with missed payments on their record.

Buy-to-let searches reflect the challenges for those providing homes for the people who cannot or choose not to buy their own homes. Arguably, the private rental sector has never been more important, but there does appear to be evidence of people looking at becoming a landlord when they may not actually be able to get on the housing ladder themselves. Three of the top five searches were: ‘first-time landlord’, ‘no requirement to be a homeowner’ and ‘minimum income - interest only / part and part single applicant’. This demonstrates that, despite reports of smaller landlords selling up and leaving the sector, there are others still very much wanting to fill the gap.

In equity release, there were three notable searches in the top five; searches for people wanting equity release on ‘ex-local authority houses’ and ‘sheltered accommodation’. Both hint at people who are not terribly wealthy but in need of accessing the money in their home to continue their standard of living. One other search of note was that for ‘spray foam insulation’. A growing issue over the past few years, there are clearly those in need of extra money who are worried because of the investment they’ve made in insulating their homes and the problems that this was subsequently shown to cause.

Finally the sectors of bridging and commercial. The key searches in bridging were for lenders who would lend on regulated bridging and those who wanted to know what both their maximum and minimum possible loan amounts could be. There was also a high number of searches for those looking for bridging as a second charge loan.

Property type was a feature for brokers helping those looking for a commercial loan, with loans for both semi-commercial and mixed-use properties featuring highly. It would be interesting to know how many of those are people moving from straight rental properties to incorporate some element of commercial believing because the returns are better.

Knowledge Bank CEO, Nicola Firth, said: “There are over half a million people still due to come to the end of their fixed rate mortgage before the end of the year. The hold put on interest rates this month may trigger confidence in people to find that next rate, but even though inflation has started to fall, there are many people really struggling with the cost of day-to-day living and the cost of their mortgage is a part of that. This is clearly reflected in the searches being carried out by their mortgage brokers and the fact that the second-most popular search is for people with missed or late payments just illustrates the challenges that many people are still facing.”

Criteria Activity Tracker
Top five searches performed by brokers on Knowledge Bank during June 2023
RESIDENTIAL BUY-TO-LET SECOND CHARGES EQUITY RELEASE
1 Maximum Age at End of Term Lending to Limited Companies Maximum LTV / Loan To Value Married Couple Application in One/Single Name
2 Missed or Late Payments First Time Landlord Minimum Loan Amount Ex-Local Authority Houses
3 Employment - Time in Current Employment No Requirement to be a Homeowner Maximum Loan Amount Sheltered Accommodation
4 Maximum Age at End of Term Using Employed Income Only Minimum Income - Interest Only / Part and Part Single Applicant Maximum Age at End of Term Spray Foam Insulation Underside of Roof
5 Interest Only Holiday Lets Employment - Time in Current Employment Leasehold Remaining Term / Beginning of term

SELF-BUILD BRIDGING COMMERCIAL
1 Maximum LTV / Loan To Value Regulated Bridging Minimum Loan Amount
2 Barn Conversion Minimum Loan Amount Semi-Commercial Properties
3 Maximum LTC - Loan To Cost Maximum LTV / Loan To Value Maximum LTV / Loan To Value
4 New Build Warranties Second Charge Loan Mixed Use Properties / Part Commercial
5 Custom Build - Maximum Loan To Cost Commercial Property Mixed Use Properties / Part Commercial

Brokers wanting to be able to search the UK’s largest database of mortgage lending criteria, can visit: www.knowledgebank.uk