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THE SUN: little known about ways lenders are helping borrowers unable to remortgage

Journalist: Sarah Davidson, Freelance

ended 13. June 2023

Hi all, 

Writing a piece looking at what (if) schemes or processes lenders have in place to help borrowers who can't remortgage due to a change in circumstances, drop in credit rating, because the monthly payments are now too high etc.

Do you know about any slightly more unusual or innovative ways lenders have helped a client who is really struggling? 

Any lender, including building societies of all sizes, relevant.

Deadline is, as per, ASAP. 

Also quite interested in whether you've noticed any change in lenders' approach to managing arrears ahead of the consumer duty rules? And if yes, then how. 

LMK if you can help!

Thanks v much

5 responses from the Newspage community

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Ross Lacey
Director & Independent Financial Adviser at Fairview Financial Management
All lenders generally have products available for existing customers to move on to at the end of their current deal ie. a product switch. This is without any further underwriting and is the route we've advised clients on, who are unable to remortgage due to a change in circumstances. We've also advised extending their mortgage term to help bring monthly payments down.

Lenders will also often be prepared to discuss other changes like switching to interest-only for a period of time, payment holidays and reduced payments. However, it's really key for borrowers to understand what impact these may have on their credit rating before proceeding.
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Scott Taylor-Barr
Principal Adviser at Barnsdale Financial Management
Almost all lenders offer existing clients the opportunity to do a Product transfer or Product Switch, which allows them to move to a new deal with their current lender rather than get stuck on the lender's Standard Variable Rate (SVR). However, the contract must remain unchanged in terms of lending amount and term to qualify to be switched with no further checks, if the client wants to amend the loan with additional borrowing or reduce the term, then the lender will underwrite the case just as with a brand new mortgage application. For those clients stuck with a lender that doesn't offer a Product Switch or Product Transfer option, then it may be possible to apply to a new lender under the "Mortgage Prisoner" rules; but these are themselves very specific and may still not help everyone.
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Joe Stallard
Director and Advisor at House and Holiday Home Mortgages
Lenders do have some schemes to help borrowers unable to remortgage due to changes in circumstances, a drop in credit rating, or unaffordable monthly payments.

These options are available across various types of lenders, including building societies of all sizes.

There's Credit Searching Instead of Credit Scoring: Some lenders opt to credit search rather than relying solely on credit scoring. This means doing a manual review of your credit file and overall situation, rather than making a decision solely based on whether the credit score reaches a specific threshold. This allows lenders to consider the specific circumstances and potentially provide more flexibility to borrowers who may have experienced a temporary setback.

Top Slicing in Buy-to-Let (BTL) Mortgages: This involves using the client's surplus income, in addition to the rental income, to top up the rental income, and sorts the affordability issue by potentially allowing the borrower to continue meeting their obligations.
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Clive Read
Owner at Goldmanread
In my experience lenders will assist borrowers as far as possible with a rate switch but some specific examples I have seen have included the following:
1) A borrower who split with her partner was allowed to take a payment holiday and convert her mortgage on to an interest only basis in order to stay in her home.
2) Move the mortgage on to a "consent to let". Lenders will sometimes allow clients to move out of the property and rent it out to pay the mortgage. This may happen where the applicants move abroad with work or split up and are unable to sell the property.
Re mortgage arrears I would say that the larger, well known high street lenders are more likely to take a sympathetic approach assisting clients. Obviously they are looking to avoid adverse publicity.
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Anil Mistry
Director and Mortgage Broker at RNR Mortgage Solutions
Unless there are significant adverse circumstances, there exists a possibility for a lender to enable a borrower to remortgage, contingent upon meeting the affordability requirements. While the interest rate may be somewhat higher, it is likely to be lower than the standard variable rate that the borrower could potentially be subjected to. In the event that remortgaging is not feasible, the borrower can opt to continue with their current lender and pursue a product transfer. This avenue allows the borrower to sidestep the need for a fresh assessment of income and credit checks by the lender, thereby presenting viable options for the borrower's consideration.