It’s been a busy time at Atom bank, with Near Prime applications at significantly increased levels.
That speaks not only to the recent criteria changes and rate cuts we have introduced, but to the need for more support for borrowers with the odd blip on their credit record.
There is a growing number of people who have experienced problems meeting all of their bill repayments in recent years, many for the first time, yet what may have been a temporary issue can translate into a much longer-term impact on their borrowing hopes.
Recognition of this growing cohort who need more flexible support led to the raft of criteria improvements we introduced at Atom bank earlier this year, such as the increase of unsatisfied registered defaults from £1,000 to £2,500 and the reduction of the ‘look back’ period for defaults to two years.
And it’s already making a tangible difference to borrowers.
Near Prime support in action
Let me give you an example of a recent case. David and Stephanie, a couple in their 30s in Northern Ireland, were finding it difficult to get a mortgage because of debt they had built up as students.
At its peak the debt had reached £22,000, and along the way they had incurred some defaults. While the debt had been repaid by 2019, and the couple have a steady household income of £90,000, high street lenders, including their own bank, were not interested.
The couple approached a broker, Marney Magee of Magee Mortgage Solutions, who was able to run them through their options. While high street lenders would not help, she knew that they could qualify for a mortgage from Atom bank as well as a range of specialist lenders.
It was then determined that Atom bank was the best option, because of the more supportive criteria on offer compared with specialist lenders.
Not only were the couple able to move forward with purchasing a dream property for their young family, but they could do it quickly, since the time between making the application and receiving an offer took just three days.
David said that having a decision so quickly “alleviated so much stress,” given what is a nervy process only becomes more stressful when trying to deal with the added complication of adverse credit.
The Prime pathway
Crucial to supporting Near Prime customers is recognising that this categorisation does not need to be permanent. Ideally, lenders can help their borrowers move back into Prime status, and therefore benefit from a wider range of options which are likely going to be cheaper to boot.
It’s something ingrained in the way we work at Atom, so that when a borrower reaches the end of their fixed term, they will be offered a Prime rate automatically if their circumstances have sufficiently improved.
That’s simply not an option with some specialist lenders, where the only option will be another Near Prime deal.
That potential path to Prime was fantastic news for David and Stephanie too, allowing them to firmly put those defaults and credit issues behind them. They don’t want to be defined by mistakes that are ancient history to them, and why should they?
Working with Atom bank not only means that your client enjoys a great product and service today, but they also have a clear pathway towards gaining Prime status and enjoying the benefits that come with that.
Near Prime isn’t going away
The difficulties of the last few years have put a lot of people under financial pressure. It’s inevitable that in some cases this will have led to arrears and defaults, and so brokers will see plenty of potential clients who have less than spotless credit records.
These issues may only have been short-term, however, and so should not act as an insurmountable barrier to a home purchase.
It’s never been more important for brokers to understand the lenders who embrace these cases and will support the borrowers not just today as Near Prime customers, but also down the line when they have hopefully improved their credit position. Near Prime is going nowhere, and neither is Atom bank’s support for this underserved segment of the market.
Richard Harrison is head of mortgages at Atom bank
