The Swansea Building Society has launched a Medical Professional Mortgage (MedPro). The new offering may be supportive to some but will be considered as unfair, preferential treatment by others, as at least one of the applicants must be a registered medical doctor or dentist and belong to a professional body.
The MedPro proposition offers a lower monthly repayment during the term of the mortgage in comparison to a standard variable rate. Furthermore, the new product allows medical professionals to borrow a higher amount against their income compared with standard mortgage products.
Sole customers will be able to borrow up to 5.5 times their sole income, with joint customers borrowing up to 5.0 times their joint income. Not a bad deal considering that the standard criteria is a multiple of 4.5.
Doctors’ salaries are not as stable as the media portrays. Stability of salary depends on the stage of the medical career journey and therefore can impact the likelihood of getting a good mortgage deal, despite the safety of the profession overall. For example, it’s common for doctors to move jobs every four to six months, so their monthly income can change frequently.
In the earlier stages of training, doctors are placed in A&E, where they can receive basic pay and then additional pay for the unsociable hours, so a salary can be higher for that specific period. A few months later, a doctor could be placed in a normal 9–5 role and back on basic pay alone, therefore taking a pay cut even though they would now be classified as more experienced.
When on call, doctors get paid a ‘supplement,’ so their basic income looks reduced, which can also make it difficult to get a good mortgage deal. The new offering from the Building Society will help tackle these obstacles, as it aims to develop a product that can reflect the current and future earnings with those likely to see their income significantly increase once fully qualified.
Although not as tailored as the MedPro mortgage deal, the Building Society has additionally added key workers from several sectors, all of whom have played a critical role in the UK during the pandemic. The Building Society’s ‘Professional’ Mortgage product offers a lower interest rate to individuals in a variety of professions ranging from accountants, to engineers, to solicitors, to architects.
The additional professions that have been added are bank workers, delivery drivers, military personnel, pharmacy workers, mail carriers, utility workers, farmers, truckers/lorry drivers, grocery shop workers, carers, and medical workers such as paramedics. The enhanced offering of the professional mortgage is less likely to alienate customers of other professions, as the Building Society is keen to “give back” and help those who have played an important role during the pandemic.
The expectation of the MedPro proposition is that this kind of profession-based selective lending will have a limited impact on impairment levels and asset quality stress in the portfolio, as the likelihood of defaulting is low. The product will likely see higher loan amounts taken out, subsequently earning the lender more in interest. The new product gives Swansea Building Society the opportunity to increase its market share if the product is relatively underserved.
Overall, it’s an encouraging win-win situation. Going forward, it will be interesting to see the success of the offering; a strong performance and effective marketing strategy would encourage other lenders to follow in its footsteps with similar tailored products.