Complex credit lending expected to grow but rate rises a challenge – Seddon

Speaking to Specialist Lending Solutions as part of the Get to Know Your British Specialist Lending Award Winner series, mortgage adviser at Right Choice Mortgages Stephanie Seddon (pictured) said during the year she had seen an increase in clients with more complex credit circumstances.

Seddon said: “For me, the biggest takeaways of 2021 have been that I am seeing clients with multiple complex issues that need addressing, meaning it takes more time to find the right lender.

“Although complex credit has always been a bit more bespoke, this is definitely more the case now and discussing the scenario with the lender in advance is a must.”

She added that more clients had more recent adverse credit which “created challenges”.

She said mainstream lenders also changed their criteria around self-employed and complex income borrowers, encouraging an increase in these borrower types to consider the specialist lending market.

Seddon said there was “huge opportunity” for a rise in complex credit lending in 2022 as the financial impacts of the pandemic continue to unwind.

She said: “The full financial effects of the pandemic are possibly still to be seen and with the mainstream lenders tightening up criteria in some areas, such as self-employed income, additional borrowing, previous adverse credit and so on, this should see more clients looking towards specialist lenders for support.

“As a complex credit broker, ensuring that my clients are aware of the areas that I’m able to assist with will be vital.”

Seddon said potential rate rises could be a “big challenge” for the complex credit market, especially as rates for specialist lenders were already higher than mainstream lenders.

She explained: “With rates for more specialist lenders already being much higher than the high street lenders, a jump at a time of high inflation and increased cost of living could impact affordability for clients needing a more specialist approach.

“Understanding how to address self-employed clients who are currently trading normally but were severely impacted by the pandemic will also be a challenge, although this may not be unique to complex credit.”

Increase in self-build enquiries

Seddon said there had been an uptick in enquiries for clients looking at self-build or moving to the country and looking for renovation projects.

She explained: “As more people embrace working from home, they look to buy where they’d like to live, rather than where is close to work. Adaptability and flexibility with self-employed clients and limited company directors could offer an opportunity to assist where other lenders are unable.”

She added that it was possible there would continue to be an rise in the number of clients with adverse credit due to the pandemic and said this could present further opportunity for the specialist market to assist self-build borrowers who were ineligible for mainstream lenders.

Awareness of specialist lending

Seddon said many consumers worried they would not be able to get a mortgage due to past credit blips, income or type of property and may not be aware of changes to regulation post-Mortgage Market Review (MMR).

This could mean they have outdated expectations around rules relating to affordability and interest-only deals, Seddon warned.

She said: “Educating these clients is key to bringing about awareness of specialist lending, and that there is very often a solution out there, but that we do work within a highly regulated environment in order to achieve the right customer outcome.

“I also think that some advisers lack knowledge or confidence in this area. Whilst lenders and networks can support in raising awareness of criteria, the adviser also has to be proactive and take responsibility.”