The issue is affecting most people now
The UK population is experiencing a once in a generation cost-of-living crisis that is placing unprecedented pressure on household finances – and this on the back of recent figures showing that 3.2 million UK adults, the equivalent of 6% of the UK population, have missed a major bill payment over the last two years due to the pandemic.
With homeowners’ finances already in a delicate position, and predictions of worse to come, the impact of continued rises in food, fuel and energy costs is likely to exacerbate this situation even further, with more missed payments, credit blips and adverse credit ratings for homeowners increasingly likely.
David Binney (pictured), commercial manager of Norton Home Loans, explained that the reality is the cost-of-living crisis is affecting most people some way or another now, and as a lender Norton Home Loans has started to see the impact already.
“Due to where we sit in the market, we are used to dealing with applicants with credit issues and we have the criteria to help many people where no other lenders can,” he added.
He explained that specialist mortgage lenders like Norton Home Loans have been catering for the needs of people with adverse credit records and those who fail to meet the lending criteria of the mainstream mortgage market for decades.
“In fact, the number of borrowers who fail to tick the ‘one-size-fits-all’ lending definition of the high street has been increasing every year, with 80% of brokers expecting to write more specialist lending cases in 2022, and 43% reporting an uplift in adverse credit case enquiries since the start of the pandemic, according to a recent poll,” Binney said.
Binney believes these trends are almost certainly set to continue as the financial ramifications of COVID-19 and the rising cost-of-living continue to play out with more people tightening the purse strings, and many others either struggling to make ends meet or defaulting on mortgage or credit card repayments.
For these people, and many like them, Binney said the specialist lending market is there to cater for their needs.
“This demographic has always been grossly underserved by the general lending community, either because they have a low credit score, a CCJ or have missed repayments and ended up with defaults on their credit profile,” he added.
Binney explained that in all these cases, specialist lenders have helped borrowers by assessing each case on its individual merit and thoroughly examining the circumstances in which the credit blip occurred, something he expects to continue as the market navigates the financial precarity currently gripping UK borrowers.
Read more: 45% of young people unaware of credit score use for mortgages
As well as defaulting on payments or falling into arrears, Binney said the impact of escalating living costs is also likely to lead to more people seeking help in the form of state benefits, either permanently or in the short-term, which may also be a concern for those involved.
“However, being in receipt of state benefits is not a barrier to securing a mortgage, with some long-term benefits considered in mortgage affordability assessments for those on potentially lower incomes,” he added.
In addition, the use of the Bank of Mum and Dad has also been on the rise, with more and more buyers forced to turn to relatives for support in accessing homeownership, or moving up the property ladder.
Read more: Bank of Mum and Dad helping 61% of first-time buyers
The fact is, as we continue to fall headlong into a period of extreme volatility, Binney explained there will undoubtedly be more people than ever seeing a reduction in disposable income, which will impact their ability to pay household bills and place them in potentially precarious financial waters. Still, there is help at hand.
“Specialist lenders are in a strong position to help those not catered for by the high street while also acting responsibly when it comes to addressing their borrowing needs,” Binney concluded.
