With more and more people struggling financially and unable to pay all the bills, whether due to the pandemic or ongoing cost-of-living crisis, brokers have revealed who the best lenders are for borrowers with blips or more serious credit issues.
The conclusion is certain smaller building and friendly societies, and specialist lenders, which take a much more manual approach to underwriting. The high street, in contrast, is often best avoided.
Paul Neal, director at Derby-based broker, First Choice Financial Services, said: “The credit-impaired market is going to be a rapidly growing one in the years ahead as the fallout from the cost of living crisis continues and higher mortgage rates hit household finances for six. More and more people are now struggling to keep up with their bills and mortgage repayments.”
David Sharpstone, director at Braintree-based independent mortgage broker, CIS Mortgage Advice, said borrowers with credit issues need to go to lenders with a more human approach: “It’s vital that credit-impaired borrowers have access to lenders that take a more human response to underwriting and do not rely on a minimum internal or external credit score pass. I’m a big fan of Kensington lately. Their processing times are in line with many of the big high street lenders and have a great degree of flexibility with credit blips. The small building societies and friendly societies have a huge role to play in this market, too, in particular where there may be small yet historic credit blips. The gatekeeper systems used by bigger lenders would automatically decline these borrowers.”
Jamie Alexander, director at Alexander Southwell Mortgage Services, agreed: “Borrowers with impaired credit need to find lenders who adopt a more personal approach to underwriting, particularly those that don’t depend on meeting a minimum internal or external credit score threshold. Lately, I’ve been impressed with Kent Reliance and Pepper Money. Their processing times are competitive with major high-street lenders, and they show considerable flexibility in dealing with credit inconsistencies.”
According to Darryl Dhoffer, director at Bedford-based The Mortgage Expert: “If we are looking purely at rates, then the likes of Loughborough Building Society and Buckinghamshire Building Society are in the vanguard of credit-impaired lenders. As for the Big Six, most will require six years of financial penance before they go anywhere near you. Meanwhile, the likes of Coventry BS and Leeds BS are shocking and will only look at an ex-IVA case 12 years after first registration. It’s like they’ve thrown away the keys on borrowers.”
Dhoffer’s views were echoed by Charles Breen, founder at Wellingborough-based Montgomery Financial: “Smaller lenders are ideal for the credit impaired as they take each application on a case-by-case basis. I once had a client who went to a broker whose exact words were “you’re screwed” because he had one default. Three weeks later, by going with Melton Mowbray Building Society, we had the offer they needed for their dream house. That is the power of the smaller lenders.”
Kylie-Ann Gatecliffe, director at Selby-based broker, KAG Financial, said: “We work with a lot of borrowers that have had credit issues, and there really are some fantastic lenders out there that want to help. Pepper, Bluestone and Vida stand out. These lenders have a human approach and you have direct contact with the underwriter to discuss the case, rather than it being a computer says no approach. This makes all the difference for these borrowers. Hardly any of them end up with credit issues on purpose. Most of it that we see is off the back of Covid, which these lenders appreciate was a one-off event and many borrowers haven’t had a single credit issue since this happened. So I believe other lenders should be doing more to look after these people, rather than it being a blanket credit score decline approach.”
Gindy Mathoon, senior mortgage broker at Derby-based Create Finance, also singled out Bluestone: “Bluestone mortgages have been flying the credit-impaired flag post-pandemic. Though there were a limited number of lenders still lending in this space in 2020, Bluestone effectively did their utmost to ensure borrowers with credit issues still got funding to buy a home. Today they still sit very strong in the credit-impaired market. They have a human touch to all of their applications rather than letting a computer make a decision. This is most definitely what is needed with this type of transaction.”
The Bluestone praise continued through David White, chief operations officer at Simply Lending, who said: “Bluestone has been a prominent player in the specialist sector for some time, but the emergence of competitors offering products for heavier adverse credit like Pepper, Vida, and The Mortgage Lender, is contributing to the reduction of these rates, which is undoubtedly a positive development.”
Bob Singh, founder at Uxbridge-based Chess Mortgages, concluded: “The mainstream lenders are willingly losing out in the adverse market stakes as they have little appetite or patience to deal with this sector. It’s no wonder the adverse credit lenders are lapping it up and making good margins. I’ve often felt the credit agencies have got lenders over a barrel, with many lenders having a complete reliance on credit scoring. Whilst many ignore minor items, many others won’t and will take a hard-nosed approach. Lenders need to live in the real world. We are in a cost-of-living crisis and should be offering solutions outside of Government-led solutions.”
