The last few years have presented a number of significant challenges for mortgage borrowers, with rising interest rates and the cost-of-living crisis stretching the budgets of many UK households.
This has resulted in an uptick in the number of people falling into arrears or experiencing credit defaults as they struggled to navigate the higher-interest-rate environment.
According to recent figures from the Bank of England, mortgage arrears rose 4.2% to £21.3bn in the first three months of 2024. This figure is 44.5% higher than the same period 12 months prior and is the highest total amount of arrears recorded since 2014.
Readjusting to a new normal
With interest rate stability now starting to return to the mortgage market, helping borrowers with credit issues and complex circumstances is high on the agenda. Many of these customers are underserved by mainstream lenders, whose blanket approach to underwriting often results in many of them being turned away for borrowing.
Yet in some of these cases, the customer’s credit default or missed payment can often be a temporary or one-off event. This can be caused by a number of reasons, including a change in employment or personal circumstances or from trying to readjust their finances to the new norm of higher living costs.
A diverse product range supported by individual underwriting
The flexible lending criteria on our Versatility range means we can cater to borrowers with complex circumstances. This includes unusual property types, historical credit blips or irregular income streams.
Those with more severe or recent credit problems can also be catered for via our Credit Repair mortgage range.
Helping these borrowers by digging deeper into their credit profile and finding out why they may have missed a payment can prove to be a much more sympathetic approach than simply turning them away. This is why we individually underwrite all our applications because it gives us a better understanding of the client’s circumstances.
Taking an individual approach for these borrowers also helps brokers as it enables them to talk through the case with our underwriters and secure the best deal for their client. Not only will this help make their clients’ finances more manageable, it will also allow them to get their credit rating back on track.
Accommodating criteria comparable with specialist lenders
The ongoing strain on household budgets due to higher living costs means many borrowers continue to face affordability challenges. There is a growing need for lenders to adopt a more compassionate approach to help borrowers navigate these financial difficulties.
Brokers unfamiliar with how complex credit mortgages work should ensure they seek support from a lender familiar with this area of the market, and a regional building society like ourselves can offer accommodating criteria as much as many specialist lenders.
With the economy now showing greater signs of stability, seeking out solutions to help these clients address the challenges they are facing is crucial.
