Borrowers from underrepresented groups often face more barriers to getting a mortgage because lenders don’t understand cultural differences in finances and households.
Mortgage applicants from black, Asian and minority communities may be met with skepticism and need to provide more information to support applications than a borrower from a traditional white household, brokers say.
Multi-generational households are common in Asian communities with bills shared by those who earn, but standard mortgage criteria are often not equipped to deal with these cases, found Dina Bhudia, director of the P2M group.
“Subscribers will ask me why I only put £50 for food [on applications]. I feel like they think I’m lying to them,” she said.
In a household for Bhudia clients, there could be five or six breadwinners, but usually no more than four people are allowed on demand, which greatly limits affordability.
Additionally, having additional family members living in the home “adds layers of bureaucracy” with lenders.
Bhudia said: “Things don’t match the picture of what underwriters think – they don’t look at the reality of the situation.
“I feel like underwriters don’t get it, and if they do, it’s a very gray area.”
Onyi Ibeke, Mortgage and Protection Advisor at Tenet, described how her clients with ties to countries of origin in Africa, either through property or sending money home, have had trouble with lenders.
In Nigeria, some women participate in susu savings schemes (also called sousou or asue) where each member contributes money, with lump sum payments then rotated within the group.
Ibeke had a client whose turn it was to receive the lump sum and wanted to use the money for a deposit, but was rejected by the lender because he could not trace the source of the money.
Ibeke said she understood lenders had to tackle financial crime, but added: “There are clearly no voices representing these kinds of people. If this was something they were used to, it would be different. … If they really wanted to trace the source of income, they could.
In other cases, underwriters do not understand why bills and a mortgage between a husband and wife will only go to the man’s name, which is typical for Nigerians. At times, Ibeke says she is put in a position where she asks questions deemed offensive to her clients.
She said if lenders took the time to understand real scenarios among minority borrowers, it “would go a long way”.
Explain the cases to have them accepted
According to Akhil Mair of Our Mortgage Broker, the key to getting underrepresented borrower cases through is talking to back-end underwriters.
He said, “A lot of Asians and Africans have a different mindset about how they pass on wealth to different generations.”
Deposits often come from family members living abroad, which means it must adopt anti-money laundering regulations.
Mair tends to deal more with specialist lenders as they take a more hands on approach to cases.
He added: “We want more and more lenders on board where we can talk to the underwriter.”
This generally excludes large traditional lenders who increasingly rely on automation, but often have some of the most attractive rates.
Mair said there was a need to further support the market by “thinking outside the box” by some lenders in the event of an automatic rejection.
Various products and lenders researched
Rob Peters, director of Simple Fast Mortgage, believes there is a need for more innovative products to support underrepresented borrowers.
He said: “There is probably a lack of mortgage products to address multiple incomes and shared costs. Specifically, there is a lack of awareness and discussion in the industry on these important topics.
Samantha Bickford, mortgage and equity specialist at Clarity Wealth Management, agreed that it would be “great to see more knowledge and awareness of different cultural household compositions among lenders”.
She added: “Considering the shared costs of living in a multi-income household would be a step in the right direction. There may be room in the market for more diverse lenders to offer a unique offering here.
Sonya Matharu, Senior Mortgage Broker at The Mortgage Mum, has successfully placed such cases with Platform and Halifax – in these cases, unprompted, she provided an article explaining the family setup.
She said: ‘This resulted in no further queries or questions being asked and a mortgage offer was issued within the usual time frame. I agree that lenders need to have a broader cultural understanding, but as brokers it is always our job and responsibility to ensure that the underwriter understands the unique circumstances and requirements of our clients.
A UK Finance spokesperson said: “The banking and finance industry is committed to financial inclusion and mortgages are granted based on the financial situation of the borrower.
“Under FCA rules, lenders are required to undertake a detailed income and expenditure assessment for any new borrowing. Lenders have a duty to lend responsibly and consider the affordability of the mortgage or long-term loan. It would not be in the client’s interest to lend more than he can reasonably afford.