"We see this as a time for everybody in the mortgage industry to show their worth and get Hopeful Homeowners onto the ladder."
For our Specialist Lending Study, Pepper Money commissioned YouGov to survey just under 6,300 adults on their financial situation. The results were not surprising, but as we prepare for this year’s study, I can’t help but think there’s even more urgency to our mission as a business.
Our last study estimated that the number of people who could be considered to have adverse credit has jumped from 6.29 million in winter 2021 to 7.91 million in the winter of 2022. Adverse credit, in this case, is somebody with a missed payment recorded on their credit file or more serious financial events such as a CCJ over the last three years.
The main two reasons given for this, with both receiving 30% of replies from survey participants, were difficulties managing money and reduced income for a period of time. An increase in expenditure, meanwhile, was responsible for 22% of people having a credit blip on file.
We also found that, overall, 10% of people with adverse credit intend to buy a home in the next 12 months, and 4% are interested in buying a buy-to-let property to rent out.
Of those who intended to buy, 55% are either very or somewhat concerned over the impact their credit history will have on any mortgage application they make.
Additionally, 33% of people with adverse credit said their level of unsecured debt had grown in the last 12 months, and 40% report upping their level of debt on buy now pay later schemes.
It’s important to highlight that only 24% of people with a credit blip plan to use a mortgage broker for advice. This is significantly down from the 54% who replied in this manner in winter 2021.
Our study paints a painful picture for many people in Britain. And with big high street banks tightening their credit scoring, many first-time buyers could be forgiven for giving up on their dream of homeownership entirely.
According to the Which? consumer insight tracker, more than a million households either missed or defaulted on a household bill in June, with 60% of those missing a bill payment reporting they missed more than one household bill payment. The Bank of England has also said that while default rates for total unsecured lending were unchanged in Q2, they are expected to increase slightly in Q3.
Options for customers may be limited, but at Pepper Money, we see this as a time for everybody in the mortgage industry to show their worth and get Hopeful Homeowners onto the ladder. Our goal as a specialist lender has always been to play as big a part in this as possible through our human approach to underwriting and inclusive criteria.
For example, because we don’t credit score, we can accept missed payments on loans after just six months, and credit card blips have no time constraints. Unsecured credit as a whole never affects your customer’s product tier, whether they have high levels of unsecured credit or have missed a few payments. This also means that, unlike other specialist lenders, we don’t move borrowers with credit blips onto more expensive rates.
Another way we could help with very specific cases is by offering second charge mortgages, allowing borrowers to consolidate unsecured debt into a single, longer term and cheaper loan. This is a role where brokers are more needed.
While it would be easier to feel down about the financial difficulties facing many Britons today, brokers and lenders can use this moment as a catalyst to demonstrate their value to the greater public.
