The role of a broker is to find the most suitable mortgage for a customer’s circumstances, and while high street lenders may be the first port of call, they may not always be the right fit.
Adverse credit is just one reason why a mortgage application might be rejected by a high street lender.
According to the latest Pepper Money Specialist Lending Study, almost 8.4 million people have experienced adverse credit in the last three years – the highest number since our records began.
The reality is that sometimes, depending on a customer’s credit profile, a high street lender may accept some adverse credit as part of a mortgage application. Often, however, if there are any other complications, the case will be rejected – even if you consider it to be a generally good case.
More people with debt burdens
One such complication is when a customer has high levels of outstanding debt. Our Specialist Lending Study found that 41% of people with adverse credit have increased their unsecured borrowing in the last 12 months, and this could create obstacles for their mortgage aspirations.
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The study found that nearly a third, 30%, of people with adverse credit have unsecured debts exceeding £5,000, and 10% have debts greater than £15,000. Additionally, 44% of those who have used buy now pay later (BNPL) services reported an increase in their debt through these platforms over the past year. This mounting debt has created significant concerns for many individuals, with 42% saying they worry their level of unsecured debt will negatively impact their chances of securing a mortgage.
Many lenders have strict debt-to-income ratios, which could see a mortgage application rejected without further consideration. However, not all lenders apply the same rigid rules, and this is where brokers can make a difference.
At Pepper Money, for example, we assess each application based on a customer’s ability to meet their mortgage payments sustainably, rather than automatically applying a debt-to-income cap. This means that we could provide a competitive solution, even if a case has already been rejected by a high street lender.
This approach gives brokers the opportunity to offer solutions to customers whose circumstances are “just-off-high-street” but still financially viable.
For me, some of the key takeaways for brokers from our Specialist Lending Study are that unsecured debt levels are rising, not all lenders have strict debt-to-income limits.
By working with specialist lenders like Pepper Money, brokers can offer competitive, individually underwritten lending options to customers, even when their financial circumstances might prevent them from securing a high street mortgage.
The 2024 Pepper Money Specialist Lending Study is available to download now at https://www.pepper.money/file/Specialist-Lending-Study-2024.pdf
