"Inclusive lending is about being able to offer mortgage products to those customers whose circumstances see them sit outside the criteria of high street lenders"
The way we work is changing. Between 2016 and 2019, the UK’s gig economy workforce doubled and it’s estimated that five million people now have multiple streams of income from a variety of different occupations — such as freelancing, food delivery and courier services — rather than a standalone wage.
On top of this, self-employment has grown by 25% since the credit crunch and, with changes in pension rules, more people are working beyond the age of 65.
Add Covid-19 into the mix, which has introduced millions more to remote working and forced thousands of others to seek new employment, and the result is we now have the most diverse workforce there’s ever been. This can cause challenges in affordability assessments and requires a more individual and inclusive approach from lenders.
I believe inclusive lending is about being able to offer mortgage products to those customers whose circumstances see them sit outside the criteria of high street lenders, whether this is due to adverse credit, complex income, or their type of employment.
This is more important than ever as, for many people, income has become unpredictable in the wake of the coronavirus pandemic.
It’s difficult for an automated underwriting system to take varying and more complex income into account or to understand the reasons behind potential changes in the way the applicant has earned their living. Thankfully, the vibrant specialist lending sector is well-equipped to take a more pragmatic view manually underwritten applications and strong communication between lenders and intermediaries.
I’ve had many conversations recently with intermediaries who are giving specialist lenders a try for the first time. They understand that many of their previously mainstream customers are now finding themselves needing the expertise and more forgiving criteria that we’re able to offer. Due to operational restraints, many mainstream lenders have pulled back on their lending criteria and tightened their credit scores, but specialist lenders have filled the gap and will continue to support those customers as we emerge from the effects of the pandemic.
It’s about recognising that not everybody fits the mould of a traditional credit scoring system and providing solutions for real people. This includes the growing number of self-employed business owners and contractors who will be looking for mortgages over the next 12 months.
It’s clear that, for many, there has never been a larger life event than Covid-19 and these customers may struggle with mainstream lending due to their newly established employment status and lowered credit score.
There’s a huge opportunity for brokers to help their customers through these changing times, utilising their knowledge and relationships with specialist lenders like Pepper Money. With the applications we work on each day, we can see where we’ve really made a difference to somebody’s life. Whether that be assisting them with the purchase of their dream home, or a remortgage that has helped them get their finances back on track, we’ve been able to help them where others couldn’t and be part of them realising their financial goals. And this is why inclusive lending is so important.