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Mortgages for those with adverse credit histories

Journalist: Emma Simon, Mortgage Strategy

ended 22. June 2023

I'm writing a feature for Mortgage Strategy - looking at the impaired credit market - and looking for broker / lender comments on the following areas. 

  1. Are brokers anticipating a significant increase in the number of people with credit blips on record/ CCJs etc given current economic conditions. cost of living crisis. Is there any evidence this is happening already - or is it a future problem as people start to come of current fixed rate deals?
  2. Has the number of mortgage products available to those with an impaired credit history increased in recent years? It would be good to perhaps get a longer-term view on this (say over last three to five years) as well as a focus on any changes to this market  since the mini Budget last year. Did this cause a sudden contraction of mortgage products, and have they started to come back since? Has this bit of the market been worse hit than mainstream mortgage products?
  3. What about the pricing of these products?  I appreciate rates will be higher than 'vanilla' mortgages - but has this differential increased since the mini Budget?  What are the sort of rates people might expect to pay for different types of impaired credit?
  4. Have lenders improved the way they underwrite these products - is the process easier and more streamlined for brokers?
  5. What are the main issues for brokers advising on this sector? Are mainstream lenders becoming stricter on what they could as 'adverse credit' for example? 

Hope that all makes sense. Any further observations/ comments I might not have included here are obviously also very much welcomed! 

Looking for comment by end of this week if possible, or Monday at a push as will be finishing the article off then 

Many thanks

Emma 


 

 


 

5 responses from the Newspage community

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Editor
Darryl Dhoffer
Founder at The Mortgage Geezer
I specialise in mortgage advice for clients with impaired credit history, and the appetite from lenders as a whole is poor - only the specialist non-high street specialist lenders, and a few Mutual Building Societies, have the appetite to lend to these clients - Mortgage products rates can vary depending on the severity of the adverse history, ie how recent was client affected, was it missed payments, defaults or CCJ's ? Is there a DMP in place, a current or recently discharged IVA or Bankruptcy in place ? - these can attract rates anywhere between 5.5% to an eye-watering 15.89% (currently!!!).
I continue to lobby hard with lenders to adjust criteria to try and accomodate this underserved market, and sadly fast growing market - but sadly in my experience many lenders have limited understanding of this market or choose not to entertain expanding in this area.
Lenders that work in this field - some are super efficent, whereas other's are just awful, and need some CPD which i can offer!
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Jamie Elvin
Director at Strive Mortgages
We have yet to see the full impact of the interest rate rises on mortgage borrowers and it is only going to get worse. This year, 1.4 million borrowers in the UK will experience a significant increase in their monthly payments as their fixed-rate mortgages come to an end. Additionally, with falling house prices, there is now a significant risk of many borrowers falling into negative equity. This situation further exacerbates affordability issues because these borrowers may have limited or no options to choose from and may be forced to move onto their lenders' standard variable rates, some of which can be as high as 10%.

A sharp increase in the number of people applying for mortgages with credit blips is inevitable. The interest rates available to those without credit issues are already eye-watering, so one can only imagine what they may be for those with adverse credit, I wouldn't rule out seeing rates in the double digits.
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Kylie-Ann Gatecliffe
Director at KAG Financial
We saw an increase in credit blips during the pandemic. Those that had always had a really good credit history were missing payments, especially those that are self employed. I feel credit issues will become more of a problem for those that don't properly plan for their mortgage payments increasing. We encourage clients to come to us six months in advance so we have time to look at their options and also help them budget properly, erasing any spending that is not needed. However for those that have had credit issues there are still plenty of products available, there was a shortage of these following the mini budget, but we are back up to normal levels. Rates are of course higher for specialist mortgages, however with the recent rate increases, we haven't actually seen as much of an increase from the specialist lenders - this has been mainly from highstreet lenders. Lenders are trying to make the process easier of getting a mortgage approved for a client with credit issues.
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Adam Smith
Founder at Alfa Mortgages
Invariably, there will always be clients facing challenges with their credit history. It is my belief that the prevalence of such clients will surge in light of the escalating cost of living. Nonetheless, the silver lining lies in the abundance of specialized lenders in this domain, rendering the task of placing such cases far from arduous. In fact, these niche lenders deliver a truly invaluable service, one that remains elusive on the high street.
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Austyn Johnson
Founder at Mortgages For Actors
There are some great products out there for bad credit, there are lenders who even offer 'Credit Repr' mortgages which end when you should be all clear again and can head to the high street.