Over one million adverse borrowers looking to buy

Michael Lloyd

October 17, 2019

An estimated 1.26 million people with adverse credit are looking to buy a property in the next 12 months, a YouGov poll on behalf of Pepper Money has found.

Brokers were not surprised by this huge number, which can translate into more clients for them.

Adam Hinder, managing director of Simply Adverse, said: “We speak to nearly 400 people a week, so the number doesn’t necessarily surprise me. It’s how we can engage with them earlier.

“Every knows somebody with credit problems but they don’t talk about it.”

Rachel Geddes, financial adviser and business principal, Mortgage Advice Bureau, added: “The percentage of clients with adverse credit has been increasing.

“The number is a big number but not too alarming. It’s more the percentage of people that aren’t aware a missed payment can cause issues.

“They aren’t informed about it early enough. It’s the amount of clients who think they’re fine for lending but then we find they fit into adverse credit and they say ‘we only missed one payment, why should that matter?’.

“They aren’t aware of it early enough. It’s speaking to clients a lot sooner in the process because it takes the stigma away from it.

Some 15% or 7.86 million people, have experienced credit problems, including missed payments, CCJs, defaults, unsecured arrears and secured arrears, in the last three years.

Of these, 16% of people are thinking about buying a property in the next 12 months, which means 1.26 million people may need the support from a broker.

Paul Adams (pictured), sales director at Pepper Money, said: “This research shows that the potential adverse credit mortgage market is larger than probably anybody had assumed.

“With growing levels of unsecured debt and increasing numbers of missed payments, CCJs and defaults, more people are finding that they have a record of adverse credit on their credit file.

“But they also still have ambitions to take the next steps in their lives – to purchase a new home and apply for a mortgage, and many of those are the people who require an adverse credit mortgage.

“The good news is that there are plenty of competitive options from lenders like Pepper Money, where decisions are made by underwriters who will take a pragmatic view of the customer’s previous circumstances and future ability to maintain payments on a mortgage.

“The not so good news is that many of these potential borrowers are writing off their own chance of getting a mortgage before they even speak to a broker.”

Adams said that some brokers may not have the level of knowledge that makes them confident dealing with customers with adverse credit.

He added: “Customers may see a broker and then not feel confident about getting a mortgage. It’s educating the broker population there are products designed for these customers and getting a mortgage can be as easy as it is in that mainstream market.

“I think jointly as an industry we all have responsibility to make it known what’s possible for the consumer, be it a trade body, a lender, some of the brokers or some of the networks.

“I just think collectively we should be able to make sure the message is spread wider across the general public, so they have more confidence to approach brokers looking for solutions.”

Geddes said that brokers who aren’t specialists or don’t know adverse inside out, should refer borrowers with adverse credit to someone who does so they get the advice and best solution.

Peter Tutton, head of policy at debt charity Step Change, compared the adverse market to the equity release market, which he said used to have bad practices.

He said: “You build trust and treat people in their darkest moments well and then you look like a different industry.”

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