We have heard so many predictions of doom and gloom we have almost become immune. So when we see a ray of sunshine, like a simple but effective new spin on the bank of mum and dad, it is revitalising. At last, a product anyone can grasp. Better still, it enables brokers to effectively avoid guarantor paperwork, second-charge legal documents and all the rest.
A new product from Woolwich allows Mum and Dad to be party to a mortgage application but not owners of the property. Their income can be included and they can help pay the monthly repayments until their child can afford to take it on themselves. It does need legal advice, so if the son or daughter fails to get to grips with paying their own way, a safety net in the legals can ensure the parents have access to repayment of any cash they have paid in when the property is sold.
This is a step forward in how lenders are encouraging buyers to finance property purchases. Now is a good time for innovation in the mortgage market. We know products have to tick all the boxes and everyone needs to be comfortable with any potential risk but that should not prevent innovation. If it is thought out properly, creates the right margin but is still competitive then why not?
We can never have it all, unfortunately, and the downside of this climate is the swing from unexciting products priced to deliver small volume to every lender slashing prices to increase business volumes. We all sign up lots of those cases that have been waiting for the right deal and, of course, the service levels of lenders drop because they have a flood of business and cannot process at normal levels.
The issue is exacerbated as the lender requires more in-depth information for every application and it is essential in today’s climate that applications match the criteria perfectly. However, the upside of accepting this is the way it has to be, with no errors or gaps on the application, no missing documentation when the application is submitted, is that this approach will not only speed up transactions but it could help maintain a successful operating model in future.
Sally Laker is managing director of Mortgage Intelligence Holdings