Adverse credit/specialist lending

There is a taboo around specialist lending. It's assumed that High Street lenders don't do it - which is not always the case. One lender with a branch on every high street recently accepted a client of mine earning in foreign currency, for example.

Many lives are becoming more complex & we need an element of 'specialist lending' at some point. There are the well-renowned specialist lenders, who come with equally well-renowned high rates & fees, but as 'specialist lending' becomes more commonplace then there is the best-kept secret for us to turn to. A cohort of hybrid lenders, including mainstream & specialist...

Building Societies! They offer a manual approach & rates that are much more acceptable than the 'specialist lenders' that initially spring to mind. Regional building societies are specialist lending heroes!

We have seen an increase over the last twelve months in specialist lender, purely due to the amount of adverse credit caused by the pandemic. Many self employed clients struggled to keep up with credit commitments, and clients who had always had a fantastic credit history saw more accounts fall into default and even CCJ's. Borrowers are normally only with a specialist lender for a short period, as once their credit has improved we would always look to move them to a cheaper option. Whilst specialist lending will always be more expensive - the difference between high street and specialist isn't as high as people usually think.

The cost of living crisis is going to result in many families reviewing their finances, and deciding what is important and what isn't. For example, a £50 monthly payment for a sofa that was bought a year ago may seem far less important than paying the gas bill. Lenders offering "mortgage payment holidays" might also seem like an easy, and tempting, way to keep costs down. Any credit issues are likely to require a more specialist lender with a more flexible approach. The rates are unlikely to be "market leading", but there will be options when other high street lenders may say no. More lenders are offering specialist lending, for example, Tandem Bank have products up to 90% loan to value, with very flexible criteria and a generous fee structure to help keep costs down.

Yes, we expect to see more clients requiring a more specialist lending approach due to the aftermath of the COVID-19 pandemic, the Ukraine war and the effects of inflation on the economy and employment. In addition, many borrowers may have experienced financial difficulties or unexpected changes in their income or credit score.
Potential borrowers should remember that specialist lenders may offer less competitive rates and fees than traditional lenders but may also be more willing to work with borrowers who have less-than-perfect credit or are self-employed. Therefore, it is essential to thoroughly research and compare options to find the best fit for your financial situation.
Pricing for specialist lending is currently reasonably stable, but it is always important to know that rates and fees can change anytime.

As we are into 2023 and the first full year with no covid restrictions, we can expect to see increased specialist lending. This is due to a variety of factors, including the fact that many business owners and self-employed individuals may have experienced financial setbacks during the pandemic and may now require access to lenders who can take into account the latest year's profits. Additionally, some borrowers may have experienced credit blips during the pandemic and may require the assistance of lenders who are willing to accept these blips and still offer competitive rates. It's important for potential borrowers to keep in mind that while specialist lenders are often able to accommodate a wider range of circumstances, this additional risk may be reflected in slightly higher interest rates, which is not likely to change by the lender.

Clients with adverse credit will be one of the hardest hit groups, don't be shocked by rates of 8% and upwards, and larger deposits.

If you don't monitor your credit file now is the time, just 1 missed payment can have a drastic effect on what mortgage you can get.

Adverse will always be part of the general day-to-day, with some clients needing more care than others in regards to their credit file.
We actually advise what clients can have now, and then if they wait for another 2 years or so, and let the adverse clear. A high percentage are happy to wait and concentrate on building a deposit and credit report.
Depending on how the utility companies conduct themselves, we shouldn't see too much of an increase in this, but if they stay as volatile as they have been, we may end up seeing a few more missed or late payments on their file.

The specialist lending sector has changed enormously in the last few years and this year it will continue to be the largest growth market for advice. It now encompasses applications which sit outside the mainstream as well as the historic areas of adverse , specialist buy to let and short term lending solutions. More and more clients look to these lenders and solutions as the idea of a "Vanilla" mortgage enquiry disappears. As high street lenders squeeze income assessments, affordability assessments and scorecard requirements the more flexible approach from specialist lenders will be welcomed by higher volumes of clients. Based on this much more bespoke approach and ability to present a case on its merits the products avaliable are fairly priced and offer great choices for borrowers.