An increasing number of advisers are searching for criteria on behalf of prospective mortgage borrowers who have found themselves in “financial complications” such as ongoing payday loans and even bankruptcy.
While the number of borrowers needing furlough-friendly mortgages is falling, many more borrowers are in need of mortgage options suitable for repayment blemishes.
Search terms and criteria inputted by advisers via Legal & General Mortgage Club’s SmartrCriteria platform during July recorded a 10 per cent jump in criteria for borrowers with ongoing payday loan agreements.
This was paired with searches on behalf of borrowers with bankruptcy jumping by as much as a quarter (24 per cent).
Demand for lenders willing to consider borrowers with satisfied repayment defaults remained in the top three sought after criteria points, L&G added.
Searches for unsecured arrears and unsatisfied defaults also continued to appear in the top 15 sought after terms while demand for criteria relating to satisfied county court judgments for debt “remained broadly consistent” month-on-month by volume.
“Despite the easing in restrictions enabling many of us to enjoy a return to more day-to-day activities, for others, the negative financial impacts of the pandemic continue to rage on,” said Clare Beardmore, L&G Mortgage Club’s mortgage transformation and operations head.
She continued: “There is still a significant portion of those seeking a mortgage who have financial complications, such as missed payments, or credit impairments.”
Beardmore reckons the role of advisers in helping clients access competitive lending options has become “ever important”.
She concluded: “The need for guidance and support when it becomes time to find a new mortgage is clear.”
Aaron Strutt, product and communication director at London mortgage broker Trinity Financial, agreed with L&G’s findings.
“So many borrowers are struggling to get a mortgage at the moment because they have missed payments on credit cards or loans,” he explained.
“Most people do not realise how failing to make a payment on time can have such a detrimental hit on their finances and potentially force them to take a much higher rate.
“In many cases it does not matter how big the missed payments are, especially if there are a few of them.”
Strutt added that lots of the lenders have strict acceptance criteria, which means these sorts of borrowers simply won’t qualify when applying for a mortgage.
“Unfortunately they could be feeling the effects of paying higher mortgage rates for a long time,” he concluded.
While a “clear trend” for advisers needing lenders suitable for borrowers with credit impairments “appears to be emerging”, L&G also said its latest data found an increase in searches on behalf of borrowers on a contract or receiving irregular income.
Criteria for borrowers employed via a fixed-term contract increased by 17 per cent in July, while general contract worker criteria requests also rose by 14 per cent. And foreign income searches also jumped by 20 per cent.
“To tackle these more complex cases efficiently, advisers also need to embrace technology, which can help streamline search results and automate processes such as affordability calculations,” said Beardmore.
“With the purchase market expected to normalise over the coming weeks and in the wake of the end of the Stamp Duty holiday, now is the time to explore the tech options and how they can benefit their business.”
ruby.hinchliffe@ft.com
