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Is there more than just Headline Rates for lenders?

Journalist: Justin Moy, Contributing Editor

ended 13. December 2023

Over the last few weeks we have not only seen a number of mortgage rate reductions across the market, but also some significant tweaks and improvements to the product design and criteria. 

For example, Skipton BS now allow up to 95% LTV on new build flats and property, Nationwide BS have reduced visa requirements, and Metro Bank have reduced the evidence on income.

So whilst lenders have their usual rate war, we also welcome thse improvements to criteria to allow more to enter the mortgage market - is this a better way of helping mortgage borrowers rather than shaving 0.05% off rates every week?

Your thoughts and comments welcome.

11 responses from the Newspage community

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Editor
Justin MoyVerified
Managing Director at EHF Mortgages
Product price is an important factor in choosing the right mortgage, driven by Best Buy tables and sourcing systems. But increasingly the lenders' criteria and product design are as important, as brokers look to help more clients get themselves on the property ladder. The cheapest rates will probably come with the most restrictions, but those with a change of job, smaller deposit or self-employed income, will appreciate more options without paying specialist rates. I think more lenders will tweak their criteria to increase their borrowing throughout 2024.
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Michelle LawsonVerified
Director at Lawson Financial
When lenders aren't getting the business in or the book balance they would like they will look to change policy and criteria subject to operational risk. It is good to see such tweaks being done which is much more innovative than just dropping interest rates. We need to help more people get a mortgage and have access to mainstream rates. I think we will see more of this in 2024 as lenders make adjustments. Ultimately, it isn't all about the rates and being top of the table- policy and criteria is essentially the bit that counts.
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Jack TuttonVerified
Director at SJ Mortgages
Rate wars always tend to be going on but it is the improvements to policy that I personally think has a far greater impact. For example, the changes that Nationwide have made to their visa requirements are a great example of this as many people fall through the gaps in lenders' visa rules. These changes will support those on a working visa and in particular NHS workers.
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Craig FishVerified
Director at Lodestone Mortgages
Criteria changes are more important than rate changes. Rate changes only determine what price you pay for a mortgage if you are eligible to get one. Criteria determine if you can get a mortgage or not. A low rate means nothing if you cant get the mortgage in the first place.
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Stephen PerkinsVerified
Managing Director at Yellow Brick Mortgages
The rate war can only cut so far into lender margins before a different type of ammunition is needed to compete for market share in this depressed market. Lenders are therefore looking at affordability, criteria and evidence requirements to attract more business, with also the increased risk covered by the better margins within the higher-rate environment. This is a very welcome next stage of battle, with some lenders being particularly innovative.
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Elliott CulleyVerified
Director at Switch Mortgage Finance
As rates start to settle down it's likely most lenders will be looking at ways to increase numbers in other ways such as relaxing criteria. I would like to see more innovation in the BTL market. High fees for lower rates doesn't solve the issue. Reductions in stress testing and better borrowing form like for like remortgages would go someway to improving what is currently a dire situation.
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Peter Stokes0
Director of Mortgages at Davidson Deem
For me, it is a balance between rate and criteria. 'Vanilla' cases will always benefit from the best rate, but let's be honest, lots of cases are no longer 'vanilla'. This is where criteria enhancements come to the fore.
However, these need to be communicated well by both email and proactive BDMs. Sites that assist brokers with criteria lookups (like L&G's Ignite) also need to be up-to-date and easy to research.
As we return to lenders more keenly pricing rates, inevitably they will turn to criteria to try and get a competitive advantage over their competitors. It is up to us brokers to be as knowledgeable as possible about these changes.
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Jamie Thompson0
Mortgage Broker at Jamie Thompson Mortgages
The truth is that banks are desperate to lender money on UK mortgages. Why wouldn’t they be, it’s as safe as houses.
Mortgage lenders can either lend to more people by reducing their rates and attracting more applications, but there’s only so far they can reduce their margin before it’s not profitable. If most of their competitors won’t lend, or won’t lend enough. to people in a specific scenario, but one bank will, they stand to be able to gain market share without completing on price at ridiculously low margins. There are some lenders who are already excellent at this and it’s nice to see others catching up. A great example is how much better Halifax (and a couple off others) are at handling applications from construction industry subcontractors.
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Graham CoxVerified
Director at Bridging Hub
With both mortgage rates and house prices remaining high, albeit slightly lower than they were, lenders have had no option but to relax their lending criteria. Halifax recently increased their maximum working age from 70 to 75 for example.

Ultimately, these criteria tweaks are designed to increase 'affordability'. What that means in reality is increased debt and interest payments over the mortgage term. Great for banks and housebuilders, not so wonderful for borrowers, especially first-time buyers. Lower house prices are truly what's required.
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Adam Smith0
Founder at Alfa Mortgages
Clients are open to any alternatives beyond just cutting rates; easing criteria is a welcome move. However, at the end of the day, what most clients truly care about is the bottom line – they want to know how much they'll be repaying each month.
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Peter Stamford0
Mortgage Expert at Stamford Home Finance
The mortgage environment is changing, moving away from the singular pursuit of low rates to a deeper emphasis on lenders' criteria. If the criteria are too restrictive it doesn't matter how great the rate is. Now, lenders are adapting, broadening their criteria to include people previously overlooked, like the self-employed or those with modest deposits. It's a smart shift, balancing attractive rates with wider accessibility. This trend looks set to redefine the mortgage landscape in 2024.