Help is wanted now from lenders on adverse credit clients – Moloney

The UK’s service industry is crying out for staff, a fact subsequently brought home by my 45-minute wait for a club sandwich.

The record number of job vacancies nationwide has been widely reported. There were around 1.3 million vacancies in March this year according to the Office for National Statistics, but here was the proof on my own doorstep, written in black marker pen, and it got me thinking.

As we slowly make our way out of the pandemic, the “Help Wanted” plea applies to many sectors of society, including mortgage borrowers. The virus has not just damaged people’s health, it has hurt their bank accounts and credit scores, with many suffering financial damage due to being furloughed or unable to work for a period of time because they were isolating.

Since the pandemic struck, hundreds of thousands of people have missed credit payments or unsecured loan repayments, often due to circumstances completely beyond their control. Last year 848,124 county court judgments (CCJ) were registered against consumers in England and Wales, up 36 per cent from 625,901 in 2020, according to the Registry Trust.

But the size of the average CCJ, the sums of money owed, fell by eight per cent, from £1,811 in 2020 to £1,658 in 2021. This fall in debt size continued a long-term downwards trend, which started after the global financial crisis (in 2008 the average CCJ was £3,662).

When it comes to mortgage borrowers this trend is important, because it illustrates that credit records are being damaged for relatively small misdemeanours – but ones which result in mainstream lenders slamming the door on those consumers affected.

The vast majority of aspiring borrowers who either have been or would be rejected by high street banks are not serial non-payers of mortgages and other debts. Most of these would-be first-time buyers, movers and remortgagors have simply experienced blips in their finances and need a helping hand from the mortgage industry, not Hobson’s choice of a deal at seven per cent or no deal at all.

Mortgage advisers need lender support

Mortgage advisers understand this dilemma and are key to solving the conundrum, as it is through seeking their professional advice that today’s adverse borrowers will find the solutions they need. But advisers also need support in this endeavour.

Advisers want to help clients repair their credit status for the future, but they also want to provide them with access to a well-priced range of mortgages right now. When applying for an adverse deal, brokers need to be confident that they don’t run the risk of further bruising a compromised credit record simply by dint of applying, or being rejected.

Advisers are busy people, processing more cases in the 12 months to Q4 2021 than at any point since 2015, according to Intermediary Mortgage Lenders Association. Admittedly some of that pressure was a result of the stamp duty holiday deadline, but the market remains buoyant, so the heat remains on – and adverse cases typically take longer to place than vanilla applications.

So, as lenders we need to offer advisers a robust system for finding the most appropriate mortgage for an adverse client without the need to apply multiple times.

We need to offer competitively-priced mortgages to suit a broad range of borrowers with imperfect credit records, whether they have recent CCJs, defaults, arrears or debt management plans (DMP).

We need to step up when “Help Wanted” becomes apparent. And help is wanted now.