James Rainbird is managing director of Pink Pig Loans
As we come out of the pandemic, it’s been somewhat obvious that the number of borrowers who have picked up some sort of adverse credit has grown.
In many cases, through no fault of their own, payments may have been missed on credit cards or mobile phone bills, or other types of credit.
Avalanche of numbers
For the most part those missed payments will be caught up with over time however they will still appear on credit reports and, from a mortgage perspective, that needs to be dealt with.
To give you some idea of the scale of this issue, look no further than Pepper Money’s most recent Adverse Credit Study which estimated that 6.29 million adults in the UK have experienced adverse credit within the past three years. Of these, more than 880,000 intend to purchase a property to either live in or let out in the next 12 months.
You can see that, from a specialist lending advice, perspective there are clearly opportunities and advisers are going to be in demand, mainly because many of these borrowers have never been in such a position before and are unsure about their situation with regards to securing a mortgage/remortgage.
These figures also suggest that a large proportion of people with adverse credit issues have assumptions over the impact missed payments or a County Court Judgement (CCJ) can have on their mortgage prospects and are not even attempting to apply for a mortgage. That is a more worrying trend and needs to be nipped in the bud.
When faced with such clients, the important thing is that advisers do not simply conclude that they cannot help them find a mortgage. The good news is there is a growing number of specialist lenders who take a pragmatic approach to credit repair and are willing to consider applicants with blips on their record.
For example, we have recently been finding solutions for clients with adverse credit with lenders such as Together, United Trust Bank, Central Trust and Norton.
These and certain other specialist lenders have a real appetite for helping the clients that the high street aren’t interested in. We’ve been able to find rates at well under 4% with such lenders who don’t credit score but take a view based on affordability.
With increasingly competitive rates and criteria out there for adverse clients, advisers should make sure they are looking to these lenders for these types of solutions, else risk the distinct possibility that the clients will go elsewhere and find someone who can help them.
In addition, our experience is that such borrowers are loyal to those who help them and maintain their relationship once their credit issues are ironed out and are looking to remortgage with a more mainstream lender.
For those with little experience in dealing with such cases, my advice would be to partner with a specialist mortgage packager such as Pink Pig Loans.
While we have traditionally been known as a second-charge mortgage distributor, we are packaging ever-increasing volumes of first-charge specialist mortgages.
While I’m not in the habit of making grand predictions I do feel 2022 will see specialist lending become much more mainstream. A combination of COVID-related job insecurity, dramatically rising energy bills and imminent interest rate rises will pile increasing pressure on borrowers.
With interest rates at historic lows since the Credit Crunch of 2008-2009, there are many thousands of borrowers who are unused to rates that were the norm in the decades before Northern Rock and Lehman Brothers collapsed. Even a modest increase to a Bank Rate of 1% will potentially have a significant effect on individuals’ affordability.
In such an environment, advisers who aren’t put off or phased by clients with adverse credit will find there are real solutions out there and their clients will be extremely grateful for their help.
My advice is to research the market and raise awareness with your clients about the options available. If you don’t feel comfortable with the process, then partner with a specialist. You won’t regret it.