The pandemic has undoubtedly put financial strain on many, if not all individuals at some point over the last 18 months.
Steve Seal is chief executive of Bluestone Mortgages
The pandemic has undoubtedly put financial strain on many, if not all individuals at some point over the last 18 months.
Instances such as furlough and redundancy have meant that a growing number of customers are now in a more challenging financial position than they were pre-COVID, and this will only be exacerbated when government support soon comes to an end.
For some, keeping up with regular payments has been a struggle, while for others the pressure has been even greater. The number of County Court Judgements issued against consumers in the last quarter of 2020 was 73% higher than in the third quarter of 2020.
But these are not the only customers in need of support. Self-employment has been on the rise, with the number of self-employed now standing at 4.2 million.
In particular, there are some sectors that have been impacted significantly by COVID-19. The travel industry, for example, is still struggling to operate and cannot return to business as usual. The end of the furlough scheme may mean individuals in these industries struggle to keep up with mortgage payments.
These shifts will undoubtedly create a larger cohort of consumers with more complex borrowing needs, many of whom will be unable to achieve their homeownership goals because they are turned away from high-street banks and may think they have nowhere else to go.
Specialist solutions
As such, the demand for specialist lending is only going to grow. Lenders will need to innovate to provide a range of solutions for customers with a range of complex financial profiles.
The specialist lending market is really leading the charge here, with more lenders looking to tailor their credit policy to support this disenfranchised group.
At Bluestone, for example, we updated our lending criteria to support self-employed borrowers who were impacted by the pandemic, considering how the applicant's business was affected by the COVID-19 and the sustainability of their income.
For self-employed borrowers in this position, we now use applicants’ 2019/2020 income to demonstrate earnings in the most recent three months have returned to pre-COVID levels.
But while the pandemic has certainly increased awareness and understanding of the specialist lending market, how do we ensure consumers know these options exist and are able to access them?
Signposting and education
As we emerge out of the pandemic, we, as an industry, must do all we can to demonstrate how the specialist lending market can cater to the changing needs of today’s and tomorrow’s borrowers.
From a lender perspective, this means providing ongoing support, ensuring they provide brokers with regular updates so they can stay on top of product developments.
From a broker point of view, signposting is crucial. Brokers have a duty of care to support these customers, and have a vital role to play in ensuring those with complex credit are aware of the various lending options available to them.
Many of these borrowers may be unaware that the specialist mortgage market can cater to their needs, particularly if they have been turned away from a traditional lender.
Looking ahead, the specialist lending market will play an even greater role in helping those disenfranchised from the mainstream mortgage market achieve their homeownership dreams.
Lenders and brokers alike must embrace this growing cohort of customers with open arms and ensure they are well-equipped to serve them. Those lenders that do, will benefit the most.
