Where borrowers are going wrong with their mortgages

“Let me be blunt, assumptions will cost you,” Chetan Jethwa (pictured left), managing director of Vistara Financial Solutions, has warned borrowers. “Over the last few months, we’ve had a run of clients placing offers on homes thinking everything’s sorted, but based on nothing more than assumptions - and it's killing deals.”

Jethwa, who leads a team of mortgage brokers, identifies a recent trend for borrowers mistakenly assuming what can be achieved for them. They wrongly assume that they can get a 100% mortgage, for example, that lenders will loan six -and-a-half times their salary, that they have a great credit rating, that they have got a solid employment status - even if they are still on probation -  and that their chosen property will be mortgageable, despite the fact that not all builds qualify.

“I’m not here to scaremonger,” Jethwa said, adding that his aim is to ensure clients know the full picture and save time, money, and disappointment before they fall in love with a property and ‘dive in’. “Speak to a mortgage adviser,” he urged. “Know the process, know your numbers, know what’s actually possible.”

So, how widespread is it that mortgage customers are operating on false assumptions – you could call it blissful, but dangerous ignorance – as they embark on their homebuying journey, and to what extent does this underline the need for broker advice?

Ajay Nayyar (pictured second from left), owner and managing director of Hearthstone Mortgages is picking up on the same issue among what he identifies as an increasingly ‘entitled’ generation of buyers. “We are seeing a massive problem with this at the moment,” Nayyar said. “The mentality among many borrowers now is completely unrealistic. They come to us acting like a mortgage is guaranteed, no matter what their situation. It is treated far too casually. They think borrowing hundreds of thousands of pounds is a simple transaction. They ignore the complexities of lending and the importance of meeting strict criteria. They literally behave like they’re ordering a pizza. You're not ordering a pizza, you're asking to borrow hundreds of thousands of pounds – stop behaving so entitled. No one owes you anything.”

He continued: “What makes it worse is when we do give correct advice, too many do not want to hear it. Their mate down the pub has told them otherwise, so they believe that instead. The professional advice of an experienced adviser is being completely undervalued. The competence level has dropped because people are getting their information from all the wrong places. Then they are shocked when their deals fall apart.”

This is exactly why proper advice and education are more vital than ever, in Nayyar’s view - advisers are here to protect clients from making costly mistakes and to guide them through what is now a very tough lending environment. “The earlier we are involved, the better the outcome for the client,” he said. “I’ve started telling clients not to put in an offer until they have spoken to me first. That’s whether it’s an investment property, or a normal residential purchase.”

Nayyar identifies a change in attitude, really accelerating around 2019 to 2021, when interest rates had essentially bottomed out. “Everyone thought borrowing was easy and cheap, and that mentality has stuck,” he said. “The problem is many borrowers have not adjusted to the reality of the market today. They still think they can get whatever they want and expect advisers and lenders to just deliver it for them. I literally have clients saying, ‘Why can't I get something in the twos?’ That entitlement is now one of the biggest challenges we face.”

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How is the market increasing borrower confusion?

Ben Perks (pictured second from right), managing director of Orchard Financial Advisers, hasn’t seen much of this trend at his brokerage, but it doesn’t surprise him that borrower confusion is on the rise. “The market has never been as ever-changing as it currently is,” Perks said. “Lenders are constantly tweaking criteria, affordability and interest rates.  Add to that the worrying amount of misinformation out there on social media. Finfluencers are running amok, often totally unqualified and with limited, if any, experience they can just jump on TikTok and say whatever will get them the most clicks. This doesn’t lend itself towards the soundest of pre-mortgage planning.”

Broker Chris Wade (pictured right), from Helen Ferneyhough Associates, always advises clients to get a decision in principle before viewing or offering on properties as it helps set realistic expectations early on and agrees that social media is playing a part in buyers’ ignorance. “There’s a growing problem with unregulated ‘gurus’ on social media, especially TikTok, sharing risky get-rich-quick schemes and mortgage ‘tips’ that often don’t reflect reality,” Wade said. “It’s misleading a lot of people and fuelling overconfidence. This just highlights how important it is to speak with a qualified, regulated adviser not someone chasing views and likes.”

For Katrina Horstead (pictured inset above), co-founder and director of Versed, this isn’t a trend that she’s experiencing at her advice business, but where it is happening highlights yet again the importance of education and proper advice for consumers, she suggests. “Most of our clients see us as the first point of call when property searching,” she shared. “We encourage them to come to us to check affordability and gain a decision in principle before scouring the pages of Right Move or engaging the services of a property agent, both to give them a level of certainty around the properties they are looking at, and to make them as attractive a buyer as possible.”

India Mustafa (pictured inset, above), a mortgage adviser for JMS Financial Services Group commented: “I see this all of the time and I think it all boils down to that fact that they not contacting a mortgage broker from the get go. As soon as you’re thinking of moving, you should get in contact with a broker who will be able to assess affordability and get you a decision in principle so that you are ready to start making offers. This way you can show the estate agents that you have been pre financially qualified and your offer will stand out from those who haven’t got that far yet.

“This absolutely shows that there is a need for better education around mortgages. I think we should have all had that basic training at school. People have been seeing 100% mortgages or 7x income advertised a lot lately but that’s the only thing that grabs them. They may not think to look into it in more detail and find out if they fit criteria. You don’t need to know all there is about mortgages, that’s what we are here for.”

Jag Singh (pictured inset, above), a mortgage adviser with Morgan Financial Solutions, commented: “There is a lot of information out there on the Internet, including TikTok and Instagram, where people are looking at products assuming that they can get them because they are seeing them online, not understanding that you have to meet that lender’s specific conditions. Estate Agents, in their attempts to be helpful, often hinder a sale - for example they will tell buyers to adjust the loan to value if the property is down valued or they will insist that their broker is used when it’s a restricted panel.”