Atom Bank has published its inaugural Near Prime Index, concluding that education, flexibility and automation are key to the future development of the market.
The Index will be carried out biannually and brings together the latest economic insights, Atom’s lending data, and the views of mortgage brokers from across the country.
The H1 2025 Index highlighted the clear need for the mortgage industry to better support borrowers with some form of adverse credit history.
Credit issues can impact all households, not just those on lower incomes - around a fifth of Atom’s near prime cases involved households with gross incomes of £75,000-£100,000, while 10% involved households with incomes of £100,000-£150,000.
More than half (52%) of Atom’s near prime cases were for first-time buyers, highlighting the crucial role near prime lending plays in helping borrowers access the housing market.
A higher proportion of Atom’s near prime customers are self-employed than employed, suggesting the income fluctuations of working for yourself can dent a person’s eligibility for prime finance.
Brokers reported the biggest concerns among their near prime clients being high interest rates (39%) and the fear of being rejected (30%).
Brokers observed that economic pressures and the growing prevalence of ‘buy now, pay later’ services will mean a growing demand for near prime mortgage options.
They agreed that lenders need to embrace a more ‘common sense’ approach, assessing cases based on their individual merits. This would include more competitive pricing, with lenders basing cost on actual risk, which in turn will open up the market to more borrowers.
Brokers added that borrowers need more education about the behaviours that push them into the near prime category, as well as how to get out of it.
Richard Harrison, head of mortgages at Atom Bank, commented: “This inaugural Near Prime Index has allowed us to take the pulse of what’s happening in the mortgage market for borrowers with imperfect credit scores. And what’s clear is that while this is a segment of the market which seems set to grow, brokers are frustrated with the approach of some lenders.
“Near prime is not something which only applies to a certain subset of borrowers - a single payment issue can have a large impact on a borrower’s record, and they are often driven by a life event or incident rather than ill discipline. As a result, it’s vital for lenders to be more open minded, to treat such cases proportionately and based on the individual factors at play."
David Castling, head of intermediary distribution at Atom, added: “The report points to a need for innovation, especially in generating more high LTV options. We have seen striking levels of demand since increasing our maximum LTV on near prime to 90%, demonstrating how valuable such products are. Technology is too often seen as a barrier, with automated assessments making life harder for borrowers with adverse credit. But, when applied properly, it will mean near prime borrowers enjoy the same certainty at pace which is available to prime applicants.
“However, the key remains education. This outlines the value of the advice process, with brokers at the forefront of clearing up misconceptions about near prime, not only helping clients understand why they have dropped out of prime eligibility, but helping them return to Prime status. Lenders must make that path back to prime as straightforward as possible - a minor payment bump in the road should be treated as such.”
