The FCA has just published its findings on its Mortgages Market Review. While its findings apply to the regulated mortgage market it does also raise questions that may also affect bridging – namely how many inactive borrowers are aware of the other finance that may be available to them?
There was some focus on mortgage prisoners, those trapped in on rates higher than they need to be paying because they cannot remortgage because they no longer meet the more stringent rules that mortgage lenders need to apply, this affects a huge 120,000 borrowers according to the FCA.
A further 20,000 borrowers with inactive lenders are affected the most as the lender has no incentive to engage with them and brokers may be unaware of the needs of these individual borrowers.
Many of these borrowers are not getting advice, perhaps because they feel there is nothing that can be done for them, or maybe because they just haven’t approached a broker and local brokers don’t know they exist.
This may well mean mortgage prisoners also feel locked out from the rest of the financial market. Or are just unaware of the breadth of alternative finance available.
People who feel trapped on a long term rate may well not even think of looking for short term finance as they will think it won’t apply to them – and indeed it may not. But on the other hand, property improvements achieved through a short term loan may well improve the LTV of the property they are living in and enable them to get a long term loan on a better rate.
How many entrepreneurs also find themselves in a state of being trapped in a finance deal on their mortgage which means that they don’t therefore look for additional property secured finance to help them to get the business deals that they need
The MMR also raised the issue of inert borrowers who could be on a better rate but who just don’t switch. These borrowers may also find a number of possibilities open to them through either bridging or other finance, but are just not engaged and so are unaware that this exists.
This is where the role of brokers is paramount. It is brokers who are in the prime position to reach out to borrowers in their local area in all circumstances and it is these same brokers who can educate these potential clients of the options open to them.
It raises the question of just how different the finances and living circumstances may be across the UK if all borrowers fully understood all the financial options open to them. This includes the opportunities that bridging finance presents to help people enhance their property wealth and escape mortgage prisoner status.