The Mortgage Market and Adverse Credit – The Reality May be Better Than the Perception By Samantha Borge
I wanted to write a few words to introduce myself and my blogs. I'm a Cardiff based mortgage advisor, as well as a divorcee and a single parent. I've been a single parent since my little girl was 3 months old. She's now 7.
I've been a member of SPW for the last few years, and have found the group a huge support. More recently, I've helped some of our single parents through my work by helping them to buy their own homes, buy out exes, remortgage and straighten out their finances using the equity in their homes. Many of those conversations have started with "I don't think I will be able to....", so I've started a series of blogs on lending issues that are likely to arise post Covid. I know first hand that single parents often feel these pinches more than anyone. This first blog is about mortgage lending with adverse credit, which is often more possible than people realise.
It is estimated that 7.86m people in the UK have experienced adverse credit in the last 3 years*
CCJs climbed to a record 1.15 million in 2019** and the financial hardships of 2020 mean that this number is only expected to increase further in 2021, and there is the potential for the rise to be a sharp one.
There are more people than ever who no longer fit the mortgage criteria of high-street lenders, and as we continue to feel the impact of the Covid- 19 crisis, this number is likely to keep growing.
“It is a common misconception that a CCJ or default on a credit file would need to be 6 years old before a mortgage application.” Samantha Borge
Thankfully, there is the Specialist Mortgage Market – a (seemingly) little known range of mortgage lenders who offer mortgages to applicants with adverse credit and unusual income streams. Whilst each of these Specialist Lenders are bound by the same responsible lending criteria as the high street names, they have the ability to take a more manual underwriting view, assessing each case on its individual circumstances, applying a common sense approach to whether or not to lend to a specific applicant.
There is a lack of awareness of the offerings of these Specialist Lenders. It is a common misconception that a CCJ or default on a credit file would need to be 6 years old before a mortgage application. The reality is that there are specialist lenders who can offer competitive mortgages to customers as early as 6 months after a CCJ is registered.
The following are recent examples of real mortgages we have placed successfully with Specialist Mortgage lenders –
Case 1 : client had a CCJ registered against him 5 years ago for non-payment of a debt when he was a student
Case 2 : client had missed a number of credit card payments whilst going through a divorce 2 years ago that became registered defaults
Case 3 ; clients whose IVA was satisfied 4 years ago.
You might also be surprised by the size of some of these Specialist Lenders. Whilst the names might not be familiar to you (largely because they can only be accessed via Mortgage Brokers) you can take comfort from the fact that many have been providing mortgages in the Specialist arena for decades and have serious financial backing. Additionally, they are regulated in the same way as high street banks.
It is important to manage expectations here and point out that the Specialist Lenders do have criteria limits. They won’t lend to everyone, but they can certainly apply more flexibility in deciding whether someone can/will make their mortgage repayments. This type of lender works on the basis of “risk vs reward”. The higher risk you are deemed to be then the higher the interest rates and/or fees are likely to be applied, but for many it is acceptable to achieving their home or property goals.
If 2020 has brought strain to your financial situation, or if you already had concerns over your ability to raise a mortgage because of your credit file, you should know that there is a range of mortgage lenders out there who accept that financial turbulence is part of life for many. Given what we are still going through, it seems inevitable that the prominence and importance of these Specialist Lenders will increase in 2021 and beyond.
If you would like to discuss your personal circumstances, contact your Mortgage Advisor. I can be reached on:
Get in touch with Samantha Borge, Mortgage Advisor, JW Homes FS Ltd 07799865907, sam@jwhomesfs.co.uk
Sources
*YouGov Adverse Credit Study
**The Registry Trust