Helping borrowers who have faced credit challenges is essential in today’s mortgage market.
Rising living costs and higher interest rates have stretched household finances, making mortgages harder to secure, particularly for those with previous credit problems.
However, recent affordability improvements could make variable rate mortgages increasingly attractive. Data from the ONS shows housing affordability in 2024 has improved significantly, returning to pre-pandemic levels.
Median house prices rose by just 1% since 2021, while average earnings increased by 20%. As a result, the affordability ratio in England improved from 8.4 in 2023 to 7.7 in 2024, with a similar trend in Wales.
In March, the Bank of England held rates at 4.5%, but Governor Andrew Bailey indicated that rates are on a “gradually declining path.”
With the latest announced cut to Base Rate, now down to 4.25%, possibly accelerated by global events such as recent US tariffs, borrowers and brokers have good reason to reconsider variable rate options.
Different borrowers, different benefits
Improved affordability and declining rates mean brokers should be actively considering variable rate mortgages, especially for borrowers seeking flexibility.
At Mansfield Building Society, we’ve reduced our discounted variable rates. Our latest ERC-free 2-year discounted variable rate mortgage, available up to 80% loan-to-value (LTV) is designed to give borrowers greater flexibility, allowing them to exit without penalties if their circumstances change.
This product is also backed by flexible lending criteria, including interest-only options, capital raising, debt consolidation, lending up to age 85, and tolerance for the odd missed payment in recent years. For borrowers who don’t quite meet high street criteria, this can be a more accessible and affordable option.
A practical approach to lending
At Mansfield, we do not use automated credit scoring systems. Instead, we manually assess applications, allowing for a more personal, common-sense approach. This is particularly important for borrowers with historic credit issues. A temporary setback like redundancy or divorce shouldn’t prevent someone from securing a mortgage if they’ve recovered financially.
By understanding the full story behind each application, we can support borrowers on the road to rebuilding their finances which is something a rigid system might overlook. And with variable rate deals currently offering more competitive pricing and the flexibility to switch without ERCs, brokers can help clients make informed choices.
A timely opportunity for flexibility
Market conditions are shifting. Falling swap rates and ongoing economic uncertainty, partly linked to US tariff policies, have already prompted cuts to the Base Rate. If this trend continues, variable rate borrowers could stand to benefit more quickly than those tied into fixed-rate deals.
For those wanting to keep their options open, a well-priced, flexible product with no ERCs could be the right fit. Now more than ever, brokers have a clear opportunity to revisit the role variable rate mortgages can play in supporting borrowers, especially those who need a more tailored approach.
Tom Denman-Molloy is intermediary sales manager at Mansfield Building Society
