Paul Adams
Sales director, Pepper Money
The pandemic has changed the world in countless ways, and it has accelerated changes that were arguably already in train. For example, internet shopping has been eating into the high street’s market share for some time, so the forced closure of physical shops at the same time as a boom in online sales has served only to increase the pace of change of an existing trend.
Similarly, remote working has been encroaching into office life in recent years, with the increasing availability of technology giving workers the flexibility to carry out their role without having to endure a commute. So, a government directive to work at home, if possible, has merely served to prove the concept that people can be productive at home. It has also shown that independently minded workers don’t necessarily need a corporate infrastructure to deliver a professional service, which could encourage a new wave of freelancers and entrepreneurs.
The pandemic has also created employment changes that people may not have anticipated as some roles, particularly in hospitality and travel, have been mothballed. In contrast, there have been openings in other areas. For example, several vaccinators at my local vaccination centre are ex-cabin crew, while the person running the centre was formerly an airline pilot.
The consequence of all this change is that the concept of a traditional pattern of employment has been disrupted more than ever, impacting your clients. A sudden change of career, a move to self-employment, taking on part-time work or earning income from multiple sources may be how they have tackled the past year’s trials.
This can prove an operational challenge for mainstream lenders. Underwriting income patterns that fall outside the norm is difficult to automate — algorithms like patterns, and the past year has shaken up most of them. Many automated lenders are unable to properly account for these changes or have struggled with service issues.
On the other hand, specialist lenders are more suited to the current situation because they are set up to underwrite applications individually. This means they are better equipped to analyse and understand changes in income, so many have fared more favourably from a service perspective.
However, this isn’t the case for all specialist lenders. Some still use a credit score to make their decisions, which can be negatively impacted by something like a change of circumstances.
Knowing where to look
Fortunately, at Pepper Money we don’t use credit scoring to make a lending decision. We make our assessments based entirely on the customer’s ability to sustain the mortgage payments. This often means we are better placed to underwrite when there is a change in circumstances. So, there are plenty of opportunities for brokers to place these cases — they just need to know where to look.
It’s a large and growing market, but it’s also likely to remain a specialist one as the onus remains on individual underwriting, which is challenging at the scale the mainstream lenders are used to processing applications. It’s important that brokers are ready to engage with the specialist market to ensure they are best placed to help clients whose circumstances have changed as a result of Covid.
