Emily Hollands, Group Head of Intermediary Sales and Distribution, OSB Group
Specialist lending has always been about understanding complexity. Many of the customers that brokers place with specialist lenders don’t fit neatly into a single category, whether that’s because of self-employment, changing income patterns or a previous credit issue.
Yet despite serving complex borrowers, much of the specialist mortgage market still relies on established methods of assessing risk.
Traditionally, adverse credit cases have been grouped according to a set of fixed criteria. A county court judgment, default or missed payment within a certain timeframe places a borrower into a particular category, which in turn determines the products and pricing available to them.
This approach has provided consistency and given brokers a clear indication of where a case may fit. However, it can also mean a single aspect of a customer’s credit history carries significant weight in the final outcome.
The reality is that borrowers are rarely defined by one financial event.
Two borrowers may have the same county court judgment on their credit file, but their circumstances today could look very different. One may have spent several years rebuilding their finances and maintaining a strong repayment record, while the other may have experienced more recent difficulties. Looking only at the adverse markers risks overlooking important differences.
The same applies to joint applications. It’s not uncommon for one applicant to have some past credit impairment while the other has a strong financial track record. Assessing the application as a whole can often provide a more accurate picture than focusing primarily on the weakest part of the case, which is where some specialist lenders often land.
As a sector, we should be asking whether traditional approaches to underwriting still provide the most complete picture of risk. In some cases, the way a customer has managed their finances over the last few years may tell us more about future behaviour than a single credit event on its own.
Having spent many years working with brokers across the specialist market, I’ve seen how often a customer’s current circumstances differ from what a credit file alone might suggest.
That doesn’t mean relaxing lending standards or taking on additional risk. Responsible lending remains fundamental. It means considering a wider range of information when assessing a customer’s creditworthiness.
Alongside adverse credit, factors such as income stability, repayment history and overall financial conduct can all provide valuable insight into a customer’s ability to manage their mortgage commitments. When viewed together, they often tell a richer story than a single credit event ever could.
Borrowers expect lenders to consider where they are today, not just the challenges they’ve faced in the past. Recognising positive financial behaviours and improvements alongside past challenges can lead to fairer and more informed lending decisions.
Lenders now have access to more data and better tools than ever before to support that approach.
Across financial services, advances in data and decision-making capabilities are creating opportunities to assess risk in a more sophisticated way. Underwriter expertise remains invaluable, but technology can support more consistent decisions by helping lenders assess applications on their overall merits rather than a narrow set of criteria.
This is particularly important as borrower needs continue to evolve. First time buyers face affordability challenges, home movers are navigating a changing housing market, and many customers have financial profiles that don’t fit cleanly into standard categories.
Specialist lenders have always played a vital role in supporting customers whose circumstances sit outside the mainstream. As technology continues to develop, the opportunity lies in combining smarter decisioning tools with underwriter expertise to create a better experience for brokers and borrowers, while maintaining the high standards of responsible lending that our sector is built on. We’ve already seen how modern decisioning technology can help deliver faster, more consistent outcomes in areas of the specialist market. Applying those same principles more widely creates an opportunity to improve the experience for brokers and borrowers while strengthening the quality and consistency of lending decisions.
Ultimately, the best lending decisions come from understanding the whole application, not simply identifying its weakest feature.
By looking beyond a single adverse event, lenders can make better-informed decisions, brokers can place more cases with confidence, and borrowers can benefit from outcomes that better reflect their circumstances.
Mortgage underwriting shouldn’t be about finding the worst thing in an application. It should be about understanding the customer behind it. The lenders that can combine technology with underwriting expertise to build a fuller picture of each customer will be best placed to deliver faster, fairer and more consistent outcomes for brokers and borrowers in the years ahead.