Ipswich Building Society had previously supported transitional lending to existing borrowers only, but have now extended this to new lenders
Ipswich Building Society has announced a new programme of mortgage lending for borrowers who have been caught out by stricter rules imposed in 2014 by the Mortgage Market Review (MMR). Many of these individuals have become known as ‘mortgage prisoners’, because they are unable to move providers or remortgage once fixed deals have expired.
Individuals who have held a mortgage since before 26th April 2014 (the introduction of MMR) and who do not meet the new affordability criteria can still access mortgage deals under a clause in the new regulations called ‘Transitional Arrangements’. While the majority of lenders are offering their own borrowers this option, hardly any are open to considering transitional cases from other lenders; seriously restricting choice and competition for many borrowers.
Ipswich Building Society’s had previously supported transitional lending to existing borrowers only, but have now extended this to new lenders. The programme will consider these new cases as long as the borrower is not increasing their loan and their circumstances have not changed. Applicants will have access to all applicable mortgage products that the lender is offering and this can be used for remortgage and purchasing a new home.
‘Mortgage misfits’ is a term used by the Society to describe those who fall outside of the usual system when it comes to access to mortgage lending based on their ability to meet an often automated approach to lending criteria. Examples include the self-employed, self-builders, first-time buyers, older generations and those who have experienced a lifestyle change. Many ‘mortgage misfits’ have kept up to date with mortgage repayments for many years but find they no longer meet the requirements of new affordability rules under MMR. Misfits may not be offered a remortgage with their same lender and are often unable to access the wider mortgage market in a meaningful way.
The new programme marks a return to the mortgage market for the Society following a major IT transformation programme carried out in 2014 which diverted resources away from mortgage selling. All residential mortgages products available from Ipswich Building Society can have transitional arrangements applied to them. Borrowers in England and Wales can apply to the programme directly or through a selected group of brokers.
Key features of lending under the transitional programme:
- The Society’s usual lending criteria will apply
- Applicants can be considered under transitional as long as they have held a mortgage prior to 26 April 2014, kept up their mortgage repayments, have no change in circumstance and no additional borrowing needs
- Applications need to be submitted with a completed Transitional Supplementary Questionnaire
- Applicants can access our standard range of mortgage products and up to 75% LTV
- Applicants moving home can be considered under transitional subject to meeting other transitional criteria
- The application must be in the same name(s) as the existing mortgage, except where an extra borrower is being added to the new mortgage application
- Applications where the existing mortgage has been subject to forbearance or arrears in the last 12 months will not be accepted.
- Employed applicants will be required to submit last 6 months payslips
- Self-employed applicants need to have been self-employed for at least the last 2 years prior to application
- Applicants must have good credit history and not be in adverse credit
- We will only offer a mortgage if it is in the best interests of the applicant
Commenting on the new scheme, Paul Winter, Chief Executive of Ipswich Building Society, says: “We are standing up for mortgage misfits who are often overlooked by lenders who insist on machine-only application processes. It is possible to still give people a choice while retaining a diligent approach to lending.
“I’m aware that some lenders do not offer transitional arrangements to their existing borrowers, let alone new applicants, and I believe the sector should consider its responsibilities to existing borrowers who have consistently made their mortgage repayments and who otherwise would be classed as ‘good customers’. Speaking to the financial services sector, I would urge my peers at other lenders to think about making the mortgage market work more effectively for mortgage misfits by offering choices for those who fall outside the norm.
“Our advantage as a mutual, and as a business which takes a human-centered approach to verifying income, means we can continue to operate in the best interests of our members and future members.”