Many people may assume their credit rating is worse than it actually is.
Jeff Knight (pictured), director of marketing, at Foundation Home Loans
It was heartening to see recent data from the Intermediary Mortgage Lenders Association (IMLA) suggest that brokers are upbeat about the prospects for Britain’s mortgage market.
Some 91% of mortgage intermediaries said they were either ‘very confident’ or ‘fairly confident’ about the outlook for the mortgage industry.
Some 95% were positive about the outlook for the intermediary-led mortgage market specifically, while 96% were also very or fairly confident about future prospects for their own business.
Despite the expected summer lull dampening activity in the third quarter of the year, the average number of cases intermediaries handle annually remains in the mid-80s.
On average, two-thirds of this activity (66%) was made of up of residential cases, including remortgaging, movers and first-time buyers, while buy-to-let covered a quarter (25%) of all activity.
Specialist cases, such as adverse credit, made up the remaining 9%.
It’s interesting to see adverse credit being segregated from the residential mortgage market within this report, and how such a relatively small percentage of cases were being handled by intermediaries.
When you consider just how many UK adults have experienced, or are currently experiencing, credit problems, this figure does seem low. So why is this?
Many people may assume their credit rating is worse than it actually is.
They may not realise that simple measures such as ensuring they are on the electoral roll and not missing any payments for a couple of years could boost their score.
It may well be the case that a strong proportion of borrowers who have had some recent or historical credit issues don’t realise that they could be eligible for mortgage deal at all, never mind a competitively priced one.
For those who may have seen getting a mortgage as a possibility, they may have been turned down by their bank due to not fitting into their tick box mortgage approach and automated underwriting systems.
And if turned down by the biggest lender they know, this could then stop such borrowers from trying again.
Believe it or not, such borrowers might not realise the value attached to a mortgage broker and how the vast majority of mortgages for people with a less than perfect credit history aren’t available directly from lenders.
Data from Moneyfacts shows that more than half of bad credit deals are only available through brokers, a figure that rises to 81% on products that will accept applicants with a history of bankruptcy.
This means that borrowers who go it alone with their application could be limiting themselves to a small section of the market.
And this is only the half of it.
In my next blog I will look at how brokers can better identify and support potential borrowers with credit-related issues.
