First-time Buyer  

Adverse credit on the rise leaving FTBs worried

Adverse credit on the rise leaving FTBs worried

The number of people affected by adverse credit has increased in the past year, leaving first time buyers concerned about having their mortgage applications declined.

Research released today (November 30) by specialist lender Pepper Money has shown the number of potential mortgage customers with adverse credit has grown by more than 1.6mn in the past year. 

Based on a survey of 6,000 UK adults, the research, conducted in partnership with YouGov, showed 15.1 per cent of all adults have experienced some form of adverse credit in the past three years.

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The research estimated that 7.91mn UK adults are now considered to have adverse credit, up from 6.29mn from the last survey conducted in winter 2021.

Pepper Money sales director, Paul Adams said the results are “unsurprising” given the cost of living crisis. 

Earlier this month, data from the Office for National Statistics revealed inflation hit a 41-year high of 11.1 per cent in October.

Gas and electricity prices made the largest upward contribution to the change, with fuel prices up 24.7 per cent between September and October this year.

Households are, on average, paying 88.9 per cent more for their electricity, gas, and other fuels than they were a year ago. 

Homeowners coming off fixed-rate mortgage deals, and those on variable rates, have also experienced large increases in their mortgage repayments in the past few months with the average five-year fixed rate sitting at 5.92 per cent as of November 22.

Of those planning to purchase a property, 55 per cent with adverse credit are concerned that they will have their mortgage application rejected due to their credit history.

“Credit problems do not necessarily need to stand in the way of getting a mortgage,” Adams said. 

“Professional advisers are best placed to help customers understand the options and point them in the right direction for a lender that is best suited to help.”

He added: “Providing fast, robust and responsible decisions for customers with complex circumstances is not straight forward for lenders, but it is possible.”

According to the research from Pepper Money, 10 per cent of people with adverse credit in the last three years intend to buy a home to live in over the next 12 months, while 4 per cent want to purchase a buy-to-let property.

jane.matthews@ft.com