How can first-time buyers with variable income get onto the property ladder?

IN Partnership with

Skipton Building Society will often venture where other lenders may not go – so how did it step up to the challenge of helping a first-time buyer couple whose income varied from week to week?

With a history dating back over 170 years, Skipton Building Society has certainly been presented with a few challenging cases in its time – and today the lender approaches such cases with the same people-focused principles on which it was founded, supporting those seeking to own their homes. Skipton has established a strong relationship with The Mortgage Store. Its team of brokers aims to go the extra mile to source deals that enable its clients to become homeowners, even when a case might initially seem especially difficult to place. One such case that The Mortgage Store recently brought to Skipton involved two Nigerian-born clients – a married couple in their late thirties with two children, who had been

In 1853, Skipton set out to help people create a better future by providing a good place for people’s savings and helping people own their own homes. More than 170 years later, its purpose remains the same. Based in Skipton, North Yorkshire, its specialities are mortgages, savings, financial advice, legacy planning, and insurance. It has over a million members and is seen as having world-class levels of employee engagement by Best Companies, which voted Skipton the third-best big UK company to work for. From its people to the environment and communities it serves, it’s aiming to help build a better future.

Skipton: Key facts

Founded

1853

“This case shows the value of advice.… The fact that mortgage brokers can contact our underwriters directly and explain the cases themselves sounds quite simple, but not all lenders allow it”

Lucy Lewis, Skipton Building Society

in the UK for just under two years. Both worked in the care sector and wanted to buy a newly built property in Kent with a purchase price of £344,995. The couple had a 10 per cent deposit, made up of savings and a builder’s gifted deposit. “They had a variable income, paid weekly, with no two weeks being the same amount,” explains Gary Clarke, who is new-build account manager at The Mortgage Store. “This made it difficult to accurately assess an annual income figure that would offer a fair reflection of the overall annual picture. “They had been coming up against brick walls with other brokers and lenders, and were facing up to the possibility that they might never own a property.” Lucy Lewis, national accounts lead at Skipton Building Society, says, “We’ve got a really strong focus on helping first-time buyers onto the mortgage ladder, something that is really important for the industry. Obviously, we need people to buy that first property to then allow them to go on and buy their second and third properties and sell their first houses.

“We recently changed our criteria – we upped the maximum loan-to-value for people on visas to 90 per cent. We’ve got great criteria around what incomes we take, and will accept zero-hours contracts. So, while this is a complicated case in some ways because it’s not something that lots of lenders will do, for us it is not as complicated because it fits our criteria without going outside of our rules. “It’s good to look at cases on their merits and to look at reasons to lend rather than reasons not to lend – that’s definitely a positive way to look at things.” She continues, “As a building society, we have a tech proposition, so we use automated valuation models and automated income verification, which make the process easier

The Mortgage Store spoke to Paul Holt, a business development manager (BDM) at Skipton, and provided him with six months’ worth of pay slips from the applicants. “Paul worked with an underwriter to give us an annual figure that we could use as part of the application,” explains Clarke. “We could then see that, yes, there was a level of income, and we had some reasonable evidence this was sustainable over a period of time. So, while there might be some fluctuation from week to week, we could be confident that in the short, medium, and long terms, as long as the clients were sensible and managed their week-by-week money, they would always be able to afford their mortgage. “There was a good case at its core, but it was about how we could go about proving that to a standard that would give an underwriter comfort that they would actually be able to say yes, we want to do this case.” He adds, “This was over and above our clients’ expectations – they were unaware that this could be done. Once the applicants knew that we would take this approach and that there was a lender who would potentially support us with it, they were much more hopeful. “With previous advisers they had consulted, this had not been mentioned as a possibility, and they had just received the ‘Computer says noooo’ types of responses from them.” The application went to Skipton’s Underwriting team for consideration, and a mortgage offer was made within ten working days. “It goes without saying that the applicants were over the moon with this outcome for themselves and their family,” says Clarke. “The Mortgage Store and Skipton were able to help them fulfill a dream of home ownership that they feared had passed them by.”

Clarke is in no doubt that the pragmatic, positive way in which Skipton Building Society dealt with the case made all the difference. “Skipton’s flexible approach – and, more important, the approachability of its BDM – meant that we had an opportunity to present the case and get practical guidance on how we could make it work,” he says. “My advice to other brokers is to make sure you know your BDMs, especially those who will not only help, but will go above and beyond to get cases looked at, even where they might not fit the criteria perfectly. “You’ll be surprised at what they can do for you, especially in those cases that are borderline, or where others have not taken the time to really get underneath the skin and see their merits. This is definitely a case that would not have gone through with many, if any, other lenders, and certainly not without Paul Holt’s support at Skipton.

“Skipton’s flexible approach – and, more important, the approachability of its BDM – meant that we had an opportunity to present the case and get practical guidance on how we could make it work”

Gary Clarke, The Mortgage Store

“The wider team are just as proactive, and while we may not always get the result we want, we can be confident that every avenue will have been explored. Skipton is one of our most important lender partners.” Lewis believes there are two key lessons for intermediaries to take away from this mortgage deal. “Make sure you get a full picture of a client’s circumstances, because the more you know about your customer the better you can present the information,” she urges. “The second thing is, don’t assume that something, because it may not fit perfectly in the ‘box’, can’t be done.” She says, “Since we have extended our foreign national criteria, we have had a number of cases like this. There are not many lenders who will lend to foreign nationals at 90 per cent loan to value, so that’s an area in which we’re really strong. With people’s situations changing and often having variable income, a case like this is not uncommon for us. It’s something we’ll see on a daily basis.

The takeaways:

Published 29 April 2024

Skipton, North Yorkshire

Based in

mutual organisation without shareholders

Structure

over one million savers and borrowers

Membership

First-time buyers: key numbers

28%

proportion of all property purchases in 2023

average age in London

70%

percentage who will compromise on something to get onto the property ladder

67%

percentage who accept their first home will be smaller than their ideal property

Source: Skipton Building Society

The scenario

and enable cases to go through. We team this with the right balance of human touch, for those cases that need to go through our expert team of underwriters.”

The solution:

“The thing that stands out for me from this case is the importance of communication and how well it worked throughout this case, not only with Paul, our BDM, communicating really well and really clearly with The Mortgage Store, but also the communication with the underwriting team – we’ve got an amazing team of BDMs and underwriters. So it’s about good communication back and forth to get the right outcome for the customer.” Skipton’s relationship with brokers is vital, says Lewis – over 90 per cent of its business is intermediary-led. “This case shows the value of advice, and shows the value of a really good broker who takes the time to really understand the customer’s situation,” she notes. “The fact that mortgage

brokers can contact our underwriters directly and they can explain the cases themselves sounds quite simple, but not all lenders allow it. I think that really helps the underwriters to understand a case and understand the situation behind it and really look to see if it’s something we’ll be able to help with.” Being able to help borrowers who fear they may not be able to get onto the property ladder is rewarding, says Lewis. “It’s incredibly satisfying,” she remarks. “It’s one of the most important financial decisions people ever make, buying a property and taking out a mortgage, so to be able to help people do that is life-changing for them and a great feeling for us. “This is one of the reasons we have been so innovative, and we’ve been looking at different ways we can lend and at what we can do to change our criteria to help more people.”

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