Brokers have a huge role to play, urges Pepper Money
People are increasingly relying on broker advice as their circumstances become more complex, according to Ryan Brailsford, business development director at specialist lender Pepper Money.
Brailsford (pictured) believes that brokers are key in supporting customers - as the findings of Pepper’s Specialist Lending Study suggests that over 15 million adults in the UK have a history of adverse credit.
This includes missed credit payments, defaults, county court judgments, unsecured arrears, secured arrears or entering a debt management plan.
The study involved surveying more than 6,000 people and indicates that in the last three years 6.92 million people have picked up adverse credit. This is a lower number than last year, when it was 7.91 million, though the number remains high, Brailsford highlights.
“Customer circumstances are becoming more complex and increasingly falling outside of the criteria of mainstream lenders,” he told Mortgage Introducer, “There are lots of options out there, but many of those lenders able to help are not available directly to customers, so brokers have access to a much broader range of options.”
How important are mortgage brokers?
Brailsford continued: “Brokers have a huge role to play, therefore, in helping customers, whether they have adverse credit or not, to open new opportunities to enable them to move forward in their life plans.”
He continued: “It’s clear, however, that it’s not just existing customers that they should be thinking about. The number of customers with adverse credit who recognise the value of professional advice has grown significantly, but there are still many who don’t and public understanding of the options available to them remains mixed.”
Is Brailsford surprised at all that more customers recognise the value of brokers?
“This isn’t a surprise,” he commented. “For most people, a mortgage is the single biggest financial decision they will make in their lives. So, it’s only sensible to seek the advice of a professional.
“Our research has found that half of all people who have missed one credit payment, go on to default, so there are a lot of people out there who are really struggling. And 82% of those respondents with adverse credit say a £100 increase on their monthly bills would have a significant impact on their finances, which is up from 76% last year.”
He added: “Nearly half of people with adverse credit say their financial situation is negatively impacting their mental health. This is up from 37% last year. So, brokers have an important role to play in helping their customers to find the right mortgage for their needs and relieve some of the pressure.”
Why do people find themselves in adverse credit?
Pepper Money’s study was launched as the Adverse Credit Study, with the primary objective of providing a single, definitive figure for the number of people in Britain who have a record of missed credit payments on their credit file.
“We also wanted to find out some of the reasons behind these missed payments, their plans, their concerns and their experience in applying for a mortgage,” Brailsford explained.
“Much has changed since that first study four years ago. To begin with, we have renamed it the Pepper Money Specialist Lending Study, acknowledging that adverse credit is just one factor that could see a customer’s mortgage application declined by a high street lender. Self-employment, working as a contractor, or even working multiple jobs can sometimes make it more difficult for people to secure the mortgage they deserve.”
He elaborated: “Affordability is a key issue for customers, as they adapt to a higher rate environment at the same time as continuing to negotiate the cost-of-living crisis. More than two-thirds of respondents to our research say their disposable income has decreased in the last year as a result of the cost-of-living crisis. Just over one in three say it has decreased significantly.
“Consequently, 84% of all respondents say the current economic environment will make it harder for them to get a mortgage. In fact, 28% of people say they have considered moving to a new area to reduce their housing costs as a result of the cost-of-living crisis. And 19% have considered downsizing.”
Brailsford added: “Our study found that 5.77m (11%) of all respondents say they have taken on additional work as a result of the cost-of-living crisis. We can lend to self-employed customers based on one year’s accounts and can accept up to 100% of monthly shift allowance, bonus payments and overtime. We can also accept income from additional employment.”
To what extent, does he think this study should reassure brokers that their services are valued and sought after?
“Brokers still need to be proactive in marketing their services and where they can add real value as there are still many customers out there who aren’t aware of the options available to them,” Brailsford considered.
“Our study found that, for most customers, their journey in looking for a mortgage starts online, and brokers have an opportunity here to ensure that their online presence delivers a positive reflection of the value they can provide.
“We are able to offer a one-stop shop for brokers to meet the requirements of their customers who require a specialist lender. We don’t credit score to make lending decisions or determine product selection, so our proposition is completely transparent and what you see is what you get. And brokers have direct access to our underwriters, enabling them to discuss cases with a decision maker and identify the best solution for customers.”
Has adverse credit peaked?
There is plenty of speculation, of course, about whether the UK has seen the worst of the cost-of living crisis yet – does Pepper Money’s business development director believe the adverse credit problem has peaked?
“I would say that it is wrong to call adverse credit a problem,” he offered. “Many people find they miss payments as a result of life events such as divorce, redundancy and more than 15m GB adults have experienced some form of adverse credit. So, adverse credit shouldn’t be considered as an extreme circumstance – it’s just a normal part of life now.
“With rising levels of unsecured borrowing, particularly the increase in Buy Now Pay Later loans, there are even more ways that people can slip up in their payments. So, it’s likely that the number of customers with adverse credit is only going to increase.”
