Why credit blips don't mean borrowers are not credit-worthy

Jeff Knight | Foundation Home Loans
11th September 2020
Jeff Knight
"Current market conditions dictate that lenders have to be agile and adapt to the ever-changing needs of borrowers and our intermediary partners. And it’s clear that specialist lenders are leading the way."

Many football fans up and down the country are frantically refreshing a variety of social media platforms to see who their next transfer target might be or who is actually about to join their ranks as the clock ticks down to the new season.

Amidst one of the strangest periods on record for the game – and for us all - it will be interesting to see how much activity the summer transfer window generates and how much money will be spent by clubs in the UK and across Europe. In all likelihood, it will not reach the gargantuan sums of times gone by due to the impact of the pandemic and the knock-on effects on past, present and future revenue streams. However, as the famous saying does ‘it’s a funny old game’ and football does seem to operate on its own monetary planet, especially within the premier league.

The financial aspect of the transfer market has always fascinated me. Does money actually change hands are IOUs just pushed around from clubs to clubs? How are deals structured, how much deposit is required, are fees paid in monthly instalments and why the rise in so many undisclosed deals?

What if a club misses one of these payments, does this mean they go onto a transfer arrears blacklist? Does this get escalated to a CCJ? Does such a blip on their record impact future transfer business? And are other clubs less likely to enter into transfer agreements because of any former blips?

You can see where I’m going with this right?

Covid-19 has changed the financial landscape for football clubs, businesses and individuals across the country. The specialist residential market has undoubtedly adjusted during this period and the likelihood is that advisers are seeing significant growth in the number of clients who, for many reasons, are now missing out on mainstream mortgage deals or who may have accumulated credit blips, perhaps as a result of the lockdown.

The increased emphasis on the specialist market was highlighted in a recent comment from Danny Belton, head of lender relationships at Legal and General Mortgage Club, when he outlined that the club had seen a 30 per cent increase in the amount of lending being completed with specialist lenders. He also underlined that the adverse credit mortgage market is far better prepared than prior to the financial crisis ten years ago. I could not agree more with these sentiments. Current market conditions dictate that lenders have to be agile and adapt to the ever-changing needs of borrowers and our intermediary partners. And it’s clear that specialist lenders are leading the way.

Minor credit blips will continue to push some borrowers beyond the tight underwriting remit of many mainstream lenders, but that doesn’t mean they are not credit-worthy in their own right, or that their property related needs should be ignored. Like many lenders operating within the specialist market, here at Foundation Home Loans, we are looking to evolve our proposition to better support those individuals with extra-ordinary circumstances, such as multiple income sources through to credit blips - whether these are historic or more recent. This isn’t easy, as many factors continue to influence our lending position, but this is an area where people need support and choice.

Demand for specialist FTB products will rise and with borrowers still struggling to raise deposits, these products need to be designed to help reduce upfront costs where possible. Thankfully, additional options are emerging for this growing band of borrowers and it’s vital that specialist lenders have the overall product offering, criteria and robust service levels in place to service these demands. And by working closely with such lenders, the intermediary market will continue to play a key role in ensuring that their clients have access to the types of mortgages they fully deserve.


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