Adverse credit and mortgages

We specialise in more complex applications so we are used to dealing with a high level of clients with previous credit issues, we have seen a slight increase in those with missed payments, defaults etc due to the tightening of household budgets. But I don't believe it is anywhere near as bad as the media would like us to believe, and most people have approached tightening up well, with cutting back on services they don't use or purchases they don't need. There are plenty of specialist lenders that look after clients really well when they have had credit issues. I believe things can always be approved but the offering we are currently seeing is a broad range of products. The biggest tip I can give any clients looking to buy who have had adverse credit, is to work with a broker that understands it. We speak to many people who have been declined elsewhere, simply because the original broker didn't even check their credit file and tried placing them with the highstreet.

As budgets have become tighter in recent months I have seen an increase in clients who are struggling to manage their finances which are leading to more instances of missed payments on credit files.

In terms of advice for borrowers, I always tell people that there is nearly always a way for a client to get a mortgage even with heavy adverse credit. Obviously, they will need a larger deposit but it is never as bad as they think it is going to be. Making sure that you have direct debits in place to make minimum payments on your credit balances as well as doing a budget planner to ensure you can manage your finances.

I think adverse lenders are pretty good when it comes to products and innovation they are also a lot happier to look into the reasons around adverse credit and tend to be a lot more flexible around criteria than high street lenders.

I have not seen an increase in adverse credit over the last few months as I had expected too due to the cost of living crisis. Naturally we usually see a spike in this in January and February due to increased spending over Christmas but this has not been more notable this year compared to previous years. When it comes to adverse credit lenders have become really allowing over the last few years and now there is an option for everyone even those with active CCJs. Clients with missed mortgage payments can still be accepted as long as they can explain why the payments were missed and why this won’t happen again. The piece of adverse credit I find lenders and the most disagreeable with are payday loans that have been used in the last 12 months. My advice to customers would be to avoid payday loans at all costs.

Credit issues and adverse lending is not anything new but is clearly on the increase. We have seen an increase in inquiries for interest-only and Part & Part mortgages over the past 6 months, to aid the current jump in mortgage rates and the compound effect of the cost of living.

With some great lending options in the debt consolidation range, with a large portion of the market accepting borrows with a range of LTVs, usually 65-70% is the norm, some will consider 85% as acceptable.

Challenging cases are clients with CCJ, DMP and defaults, although there are options available, the effect of a long period of low mortgage rates, increase in the cost of living, minimal or no income increases and now higher mortgage rates make a perfect storm for those who have been struggling.

We always advise clients to review their budget, cut unnecessary expenditures and focus on overpaying outstanding debt in order of the most 'expensive' debt as a priority.

We have noticed a slight increase in cases involving adverse credit. Brokers should encourage clients to obtain their credit report from checkmyfile.com. This allows brokers to examine their credit files and determine which lender is most appropriate for their situation. The available product options depend on the nature of the adverse credit, but generally, clients may be able to secure a mortgage with a higher interest rate and/or a larger deposit. Clients who have taken out payday loans recently or secured credit in a short amount of time may have limited options available to them. It would be beneficial for lenders to offer more options for clients with smaller deposits, as adverse options tend to increase for those with less than 20% deposit. My advice to clients would be to obtain their latest credit report from checkmyfile.com, work with a broker such as our firm, and plan accordingly. Certain options may not be feasible at present, but they may become viable in the future.

We offer clients advice on all kinds of complex mortgage scenarios and adverse is something we have cut our teeth on since the late 80's. It's funny we had this as a topic in a recent internal meeting here - whilst programming the lenders' changes into our client online automated application systems. The results of our meeting was that Covid and the inflation-created monthly household budgetary restrictions for the general public have shown us more "good earners" having missed payments on both credit cards, HP, car lease contracts, and sadly household mortgages. Generally, lenders have shown excellent efforts to keep the funds flowing and making positive adjustments to their adverse acceptance criteria, even the High Street ones when accessed via a suitably experienced mortgage advice firm. The biggest need from lenders is for them to allow debt consolidation remortgages on shared ownership properties - the lender choice for this niche is VERY small and needs expansion.

We have had a flurry in the first few months of adverse credit mortgage enquiries, however the definition of "Adverse" is seeming to extend to those who have overstretched on unsecured lending and either want to consolidate, or have started to miss payments so fall into the adverse lending arena just a little too late. A straightforward adverse case seems easier to place than a complex income or debt consolidation case and I'm seeing a massive rise in both of those genres.

Due to seeing a lot more of this, we created a video on our Alfa Mortgages YouTube channel