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What the specialist lending sector can learn from the Spring 2021 Adverse Credit Study

Ryan Brailsford | Pepper Money
|
11th June 2021
Ryan Brailsford Pepper
"With such drastic increases in digital connectivity, it’s essential to use these platforms to establish your services as a go-to, trusted choice."

There are 880,000 potential customers currently experiencing adverse credit across the UK, who intend to purchase a property in the next 12 months who may need the support of a broker and specialist lender.

This is one of many significant findings in Pepper Money’s Spring 2021 Adverse Credit Study, conducted with YouGov to shape how specialist lenders and brokers approach business and respective customers experiencing adverse credit.

This Study is a unique opportunity to provide a holistic analysis of how the Covid-19 pandemic has had a significant financial impact on customers with adverse credit, as we’re now in a position to reflect on the path to national economic recovery.

Despite the clear and obvious financial impact of Covid-19, for me, one key finding of the study is that the UK population’s financial circumstances are divided when it comes to how people have been affected by the pandemic. There is a share of people who are actually better off and have been able to clear their debt, as illustrated by an increase in respondents reporting they now have no debt in the study. On the other hand, confidence has decreased in customers with adverse credit as many are concerned that their future mortgage application will be declined with their credit history.

From a lender’s perspective, 2020 was a significant year to offer payment deferrals and hands-on support directly to those in need, providing relief at a time where rising missed/late payments were out of our customers’ control. We must ensure this doesn’t lead to those customers becoming disenfranchised from financial products in the future.

At Pepper Money, we live and breathe helping customers with complex mortgage applications. In the last year, we’ve seen irregular and complex income become more common with furlough and businesses opening and closing due to lockdowns, so this will be an area to look out for, particularly when government support is removed.

It starts with education

Where lighter adverse credit is registered, reassurance is crucial. Customers need to understand that there is more to mortgages than just the high street banks.

This starts with education. A key result from the Study reveals that only 44% of customers with adverse credit would approach a mortgage broker to secure a mortgage when buying a property. This has decreased from 66%, as reported in our Adverse Credit Study conducted in Autumn 2020.

Using your digital presence as a store-front to generate interest in your services can illustrate your ability to help customers with small credit blips obtain a mortgage. Online research is now leading the way by some distance (56% would use this) to find a mortgage broker.

With such drastic increases in digital connectivity, it’s essential to use these platforms to establish your services as a go-to, trusted choice. So, it’s time to sharpen up your digital presence to ensure that when a customer is looking for a broker, they find you.

Engage in new business with a human approach

Conversations and education from brokers (and lenders for that matter) are also crucial to dispel any misconceptions customers have. Specialist lenders, in particular, aren’t looking for a specific profile of customer. In fact, it’s quite the opposite. We help brokers and their customers to achieve their homeownership potential despite their previous financial history. We want to understand the story behind each customer to give them the best opportunity of a successful application.

Many of us have difficulties talking about money or money worries, so offering customers a safe space to communicate without fear of judgement is very important. Only when you know the whole story are you able to help them get a mortgage.

Where brokers can help, the chances of securing a mortgage are good. Our Adverse Credit Study shows that more than four in 10 adults who had experienced adverse credit before purchasing the home they currently live in said it did not affect their ability to get a mortgage, which is great news. Better still, only 6% of those surveyed said their application was actually declined.

Education is a big part of Pepper Money’s mission. It’s clear from the Study that there will be brokers who do large volumes of business that have never needed specialist lenders before. Our Study reveals that 629,000 individuals who’ve had adverse credit in the last three years want to buy a property to live in, in the next 12 months. Additionally, 251,000 customers are seeking to purchase a buy-to-let property in the next 12 months.

There’s plenty of opportunity out there, and you can gain more insights into making the most of that opportunity in the Spring 2021 Adverse Credit Study.

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