"2.1m households miss or default on at least one mortgage, rent, loan, credit card or bill payment, a figure which has remained above 2 million every month so far this year."
Moving on from the pandemic, a huge amount of pressure is still being placed on a range of households and individuals as living costs continue to escalate. Although an increased cost of living has become a more prevalent reason, many people are also being affected by life events such as unemployment or redundancy, injury, health concerns or relationship issues which has led to them experiencing some level of debt or a missed payment over the past couple of years.
Issues around maintaining payments on a range of regular outgoings was highlighted in the fact that more than 2m households are reported to have missed a bill payment every month this year. In addition, the monthly insight tracker from consumer group Which? estimated that June saw 2.1m households miss or default on at least one mortgage, rent, loan, credit card or bill payment, a figure which has remained above 2 million every month so far this year.
The tracker also found that six in 10 consumers have had to make some kind of adjustment – such as cutting back on essentials or dipping into savings – to cover essential spending. That figure is similar to April and May but much higher than a year ago, when it was around 40%. Most consumers across all income groups said they had made an adjustment to cover essential spending in the past month, but this was most common among households with an income of up to £21,000. However, 57% of consumers with a household income of more than £55,000 were said to have made at least one adjustment.
This payment struggle is also evident in other areas which may also impact credit ratings and profiles.
Research from KPMG found that almost a third (29%) of individuals have struggled to pay for their media subscription services since the start of 2022, with people needing to borrow money or use savings to pay their bills. The survey of UK consumers conducted by OnePoll found that 15% have missed or defaulted on a payment for a media subscription service in the last three months.
These are trends which we, as a lender, need to carefully track and ensure that our product range and criteria evolves accordingly in a bid to provide responsible and appropriate solutions for credit-worthy borrowers who may have been impacted by unsecured credit-related events during this period.
In response to this, we at Foundation have reappraised our existing credit tiers to more accurately reflect the position of these borrowers, allowing for a wider range of blips in unsecured credit in the last two years specifically. We have also introduced a new F4 range, and jointly, this should open up our products to a broader group of customers and deliver better pricing options for many.
Providing options to match an array of borrowing needs, based on their previous and existing credit positions, is one of the key reasons why the specialist residential market will continue to rise in prominence. And Foundation Home Loans remains at the heart of delivering and driving change within this marketplace in a carefully considered and responsible manner.
