blog header image

Posted : 13 Nov 2020 at 13:45:57
Category: News

Share this article

Tighter self-employed and affordability rules here ‘for some time’ – HSBC

Tightened self-employed lending criteria and affordability rules are seen across the mortgage market since the pandemic began could remain in place into 2022, HSBC is warning.

And as sectors such as hospitality, retail and healthcare are affected in different ways by the economic fallout of the Covid-19 pandemic, lenders could start segmenting the market by various traits.

HSBC also said it was looking to continue expanding its broker distribution to more firms and suggested now was a good time for advisers to be considering their fee-charging models.

Speaking at The Mortgage and Protection Event 2020, HSBC UK head of the south region and large loans Amanda Fenner acknowledged self-employed borrowers had seen some of the biggest changes.

She recognised some brokers have been frustrated about how criteria for self-employed borrowers have changed across the industry since the pandemic began.

However, Fenner said HSBC had no plans to loosen its self-employed affordability criteria, adding the lender was keeping “really close” to self-employed lending.

“To get as up to date a view on a client’s business and compare it with pre-Covid times, business bank statements have become a must-use tool, but to pull out the correct information and manually assess it can take an hour and a half,” she said.

“We’re determined to keep helping self-employed customers, but we need to find a way to get an updated view without these time-draining processes – so technology enhancements will be useful.

“Open banking would take it to 10 minutes, the outcome of the case will be the same but we’ll be able to deliver a much better customer journey.”

Pre-empt underwriter questions

Fenner urged advisers to detail the bigger picture wherever possible in lender systems when submitting applications and not to wait for an underwriter to ask expected questions.

“I think this level of detailed underwriting could be around for some time – a self-employed business owner doesn’t have to file their 2021 business accounts until January 2022,” she continued.

“But we need to get better at helping certain types of businesses where the picture is far less uncertain, so we could end up with a segmented lending approach.”

She continued: “We’re trying to be as pragmatic as we can with self-employed, we’ve tried really hard not to say here’s a one-size-fits all, we really are looking to you to provide us with more insight with supporting documentation to make the right decision for the client and that will continue.”

Tighter affordability

On changes to affordability, Fenner acknowledged affordability has definitely reduced across the market.

“You’re unlikely to see that come back until employment feels more solid and lenders want more of your business,” she noted.

“When lenders are ready to compete again for business you may see the reintroduction of annual bonuses to lending policy, but the likelihood is we’ll want to see a bonus paid in 2021 – that’s in order to be comfortable this isn’t an income they are likely to lose.

“In some cases that could mean another six or more months away, so it’s likely there will be a lull where bonuses are being paid.”

‘Engage more brokers’

During the question and answer session, several advisers asked if HSBC would be expanding its distribution to more smaller networks and directly authorised firms.

Fenner said the bank was “looking to engage with more brokers” and while she couldn’t confirm any exact plans, she admitted further broker rollout was “something that’s always on our radar”.

Fenner continued: “Brokers have done an incredible job and I can see clients staying loyal for a long time.

“As those clients who went direct now find themselves waiting three or four weeks just to get an initial meeting, so the intermediary market looks set to be strong for some time to come with more than four out of five mortgages being written by a broker.”

She added: “If you answered no to ‘Will you be charging a client for the professional advice you give?’ now might be the time you want to re-address this question and make a decision that best suits you, your business and your clients.

“There’s no right or wrong answer, but reflecting on it is surely a must.”

Elsewhere in the session, Fenner acknowledged HSBC was keen to re-enter the 90 per cent loan to value (LTV) space but needed other lenders to join it to avoid being overwhelmed with demand.

SIMILAR NEWS

blog header image
NEWS
NUMBER OF FURLOUGHED CONSTRUCTION WORKERS FALLING FASTER THAN WIDER ECONOMY

Number of furloughed construction workers falling faster than wider economy  Latest HMRC data shows size industry’s furloughed workforce shrank by 15% in March The numbe ...

blog header image
NEWS
WILL THEY COME BACK? WHY BRITISH CONSTRUCTION LOST ITS EASTERN EUROPEAN WORKFORCE

In recent weeks, a persistent rumour has been circulating about migrant workers in construction. The specifics differ, but the central premise is the same: ‘foreign workers have taken the govern ...

blog header image
NEWS
CONSTRUCTION OUTPUT GROWS BY 1.6% IN FEBRUARY

Construction output grew by 1.6% in February 2021, largely thanks to a 1.5% increase in new work and 1.9% increase in repair and maintenance, as the industry maintains its recovery The level of constr ...

blog header image
NEWS
IR35: RISHI SUNAK URGED TO AMEND ‘FLAWED’ OFF-PAYROLL RULES TO ENSURE SELF-EMPLOYED RIGHTS

IR35 LEGISLATION must be re-examined to correct the "fundamentally flawed" nature of how off-payroll rules operate, a group of MPs have said. IR35 changes kicked in this month, following a year of del ...

blog header image
NEWS
FREE HOME TESTING COVID KITS NOW AVAILABLE TO ALL CONTRACTORS

Construction companies can now order free Covid test kits for workers to use at home. The extension of the workplace testing regime will supply home test kits to companies with over 10 workers where ...

blog header image
NEWS
EMPLOYMENT LAW CHANGES: WHAT YOU NEED TO KNOW

With Brexit, Covid, and new tax rules for the self-employed, this year sees a plethora of significant changes in the field of employment law. Here is a recap of what you need to know. 1. End of furlou ...

business-directory Business Directory
smartbusinessdirectory Payroll Services Business Directory
truebusinessdirectory payroll-services Directory
payroll-services Directory