It’s not long now until the publication of the 2023 Pepper Money Specialist Lending Study, which will feature insights into the lives, aspirations and challenges of the nation’s households when it comes to their finances and mortgage plans.
This is now our seventh study of this kind. The first study was released back in the autumn of 2019 – a time when none of us knew what Covid was and the “cost-of-living crisis” was seldom, if ever, used as a phrase.
The study was originally launched as an Adverse Credit Study, with the primary objective of revealing a potential size for the adverse credit mortgage market. We also wanted to find out some of the reasons behind these missed payments, consumers’ plans, and their concerns and experiences when applying for a mortgage. And, in order to do this, we partnered with YouGov to carry out research amongst a demographically representative sample of the British adult population to ensure our results were statistically robust.
Much has changed since that first study four years ago. To begin with, we’ve 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.
We’ve obviously experienced the Covid pandemic, which temporarily pressed the pause button on the economy and has permanently, it seems, changed the way we all work, with remote, or home working, now playing a significant role in many people’s lives. This has a big impact on the property and mortgage market of course. Suddenly, homebuyers don’t have to consider as strongly whether a property is within a reasonable daily commute of their workplace. They can look further afield, and this has the potential to open up new opportunities, not least for first-time buyers.
More recently, spiralling inflation has led to rising prices and sparked higher interest rates in an attempt to slow the increase, with a cost-of-living crisis putting a squeeze on almost everyone.
So, ahead of the publication of the 2023 Pepper Money Specialist Lending Study, we thought we’d look back over the last four years to remember the main headlines from previous years and consider how things have changed.
2019: Pepper Money Adverse Credit Study
The main headline from our first report, which was called the Pepper Money Adverse Credit Study, found there were 1.26 million adults in the UK who had experienced adverse credit in the previous three years and were looking to purchase a property in the next 12 months.
The study found that having an adverse credit record affected the mortgage process of nearly 50% of those who had experienced it before purchasing their current property, but only 5% had declined a mortgage the first time they applied.
And, in 2019, 40% of participants surveyed who are looking to buy in the next 12 months would seek advice from a mortgage broker.
2020: Pepper Money Adverse Credit Study
There were two reports this year. The winter study, the second study of the year, and the first since the onset of Covid, found that 1.09m adults in the UK had experienced adverse credit within the previous three years and were looking to purchase a property in the next 12 months.
Two thirds (66%) of these adults would seek advice from a mortgage broker, up from 40% the previous year.
The impact of Covid was clear to be seen, with 2.1 million people (4%) saying they had missed a credit payment in the last 6 months and half of those (2%) people have missed several consecutive payments.
2021: Pepper Money Specialist Lending Study
In 2021, the first time the report was extended to become the Specialist Lending Study, the number of people with adverse credit who said they planned to buy a property in the next 12 months increased to 1.13m, with 54% saying they would seek the advice of a broker.
More than a quarter (28%) of people with adverse credit said they were ‘very concerned’ about their mortgage application being declined due to their credit rating, which was up from 12% in the previous wave.
2022: Pepper Money Specialist Lending Study
Another year where we conducted two studies. The winter study, which was the first report impacted by the cost-of-living crisis found that 71% were concerned about their financial situation as a direct result of the cost-of- living crisis, with 76% saying a £100 increase in their monthly bills would have a significant impact on their finances.
The study found that 7.91 million adults in the UK could be considered to have adverse credit, which was over 1.6 million more than the last wave of the research in 2021.
A third (33%) of people with adverse credit said the level of their unsecured debt had increased in the last 12 months, with 40% saying they had increased the debt they have on buy now pay later schemes. And 31% of people with adverse credit are concerned that their level of outstanding debt will make it harder for them to get a mortgage.
We also, carried out specific research amongst Hopeful Homeowners, finding that the biggest barrier to homeownership was saving for a deposit (36%). Nearly a quarter of
hopeful homeowners (24%) said it is being able to borrow enough to afford to live in an area they want to live in, with 16% saying it was being able to afford the mortgage payments.
And our research amongst business owners found that more than three quarters (77%) of self-employed workers said that being self-employed makes it more difficult to be approved for a mortgage. One fifth (20%) said their business made over 10% more profit in the last year than the previous two years. The research also found that 25% of all workers earn variable income.
Coming soon
This side of Christmas, we will launch the next edition of the Pepper Money Specialist Lending Study, which is the most comprehensive and extensive piece of research we have ever commissioned. We are very excited about the findings of the study, which will provide brokers with the insights they need to better serve their customers and grow their business. Look out for the 2023 Pepper Money Specialist Lending Study. You won’t want to miss it.
Paul Adams, Sales Director at Pepper Money
