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Best options for adverse borrowers?

ended 15. October 2024

For a national news outlet. Last week, the Bank of England published data showing that default rates on secured loans to households increased in Q3 and were expected to increase again in Q4. Losses given default on secured loans decreased in Q3 and were expected to increase slightly in Q4. The journalist is keen to know if you have seen evidence of more borrowers struggling? Also, if people are struggling, what should they do — and categorically not do (stick their heads in the sand)? More generally, if people have had some credit problems in the (not-so-distant) past, which lenders on the whole are better suited to them? High street or specialist? Any examples? Lastly, should people with credit issues always seek advice when taking out a mortgage?

7 responses from the Newspage community

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Justin Moy
Managing Director at EHF Mortgages
For those borrowers with any knowledge of credit issues it is imperative to speak with a mortgage broker, especially one that has experience of specialist lending and great relationships with those lenders that can help. Whilst there is one or two lenders that do deal directly with borrowers, in the main the various building societies and specialist lenders will work directly with brokers who will be able to discuss the cases directly with underwriters, check a multitude of criteria, and be well versed with reading credit files. This is a time for support, help and advice, and where brokers add the maximum value to borrowers, and potentially save them a fortune.
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Simon Bridgland
Director at Charwin Private Clients
Secured loan defaults will continue to increase into 2025, as households struggle with persistent increases in monthly costs. Since the beginning of 2024 I have seen many applicants whose mortgage term has either ended or is due to end, of these roughly 2 in 3 have arrears. Many have tried to renegotiate with their lender and add the arears to the mortgage debt to get back in control of things, but with the arrears already showing on their credit file, remortgaging is often out of the question, as most of the time high street lenders won’t lend to those with adverse credit history. Other specialist mortgage lenders may be willing to help via a mortgage broker, or other borrowing options such as lifetime mortgages could be a good fit as the underwriting on these tend to have far less emphasis on the borrower’s credit history, and they can also give far more flexibility on monthly payments, affording the breathing space an applicant may need.
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Michelle Lawson
Director at Lawson Financial
The populus with any known adverse credit should definitely take advice around their best options. Most importantly, people need to monitor their behaviour and understand credit too. So many people think that just paying off any arrears clears the liability without realising it will impact their credit file for 6yrs. Sometimes people are lazy, some people ignore things thinking nothing will happen, from time to time things happen in error. Burying your head in the sand is the worst thing you can do and there are some high street and specialist lenders that will take varying views on circumstances. It is often about the bigger picture.
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Ben Perks
Managing Director at Orchard Financial Advisers
If you’ve had a default, or any credit problems for that matter, the best thing you can do is own it and get infront of the problem. It won’t go away for a while and pretending the problem doesn’t exist will just cause it to snowball.
If you tidy it up, there will still be mortgage options available to you. Engage with your local mortgage broker as they’ll be able to provide guidance and solutions.
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Patricia McGirr
Founder at Repossession Rescue Network
One size never fits all with mortgages, and choosing the wrong one today could be like slipping into a financial straitjacket tomorrow. If you’ve had credit issues, specialist lenders can give you a chance to find finance but it’s usually at a cost. Don’t mistake a quick fix for a smart solution.

If you’re struggling with payments, you need to speak up. It’s not the time for hoping things will get better and soldiering on alone. Timely action can give you a lot more choices, so speak to your lender before your options disappear.

Trying to wing it without expert advice is a fast track to regret. Tailored guidance isn’t a luxury when you’re in debt, it’s a lifesaver. Get the right advice now, or you risk paying the price for years to come.
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Dennigan Tyson
Mortgage & Protection Adviser at Pia Financial Solutions
In respect to this, I have seen a surge in second charge mortgage enquiries and what they entail. I think previously, second charges were always quite an extreme option due to borrowing being so cheap and bank loans were accessible and manageable.

However, when speaking to people, many are saying that bank loan interests are higher than when initially quoted and second charges being used by many in the Southeast with the equity they have in their homes.

I think in respect to taking advice on credit and its implications, it's important that responsible advice is given. There is now more financial promotion than ever with the rise of social media and its important individuals and families get comprehensive advice about credit agreements and how it may impact them getting further credit or mortgages.
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David White
Chief Operations Officer at Simply Lending
The pinch point for many is having secured a relatively low rate with a specialist lender 2 to 5 years ago, only to see their payments skyrocket when that deal has now ended. In this scenario, seeking advice is critical, whether from their lender or a mortgage professional, as help is available.