As we head into the latter half of 2024, it is encouraging to see that the mortgage market and wider UK economy are starting to show increased signs of optimism.
The rate of inflation continues to hold steady, sitting comfortably at the Bank of England’s target rate of 2%; interest rates are slowly starting to fall, and the political landscape is beginning to look more stable.
While all these signs are encouraging, and hopefully point to a renewed confidence in the mortgage market as we head into the last six months of the year, the number of borrowers who hold some form of impairment on their credit record is also likely to have risen.
In fact, according to figures from The Money and Pensions Service, more than 16 million people missed a payment on key household bills last year, with more than two million people doing so for the first time.
Many of these customers will now have a minor or one-off blip on their credit record and need some help when it comes to taking out a mortgage or securing additional funding, particularly as a minor default is likely to impact their chance of securing a mortgage on the high street.
Addressing the needs of the borrowers is vital, which is why Norton Home Loans recently introduced two new Optimal plans on its first and second charge mortgages.
The range has been specifically designed to appeal to a wider pool of borrowers, and is aimed at customers with minor or temporary blips on their credit record.
For many of these borrowers, a missed payment may simply be a one-off or temporary issue that has spiralled out of control due to a change in personal circumstances, employment status or because of injury or illness. In other cases, it could simply be an oversight by the borrower which has negatively impacted their credit rating.
Helping these borrowers get back on an even footing before things escalate further is crucial, which is why Norton Home Loans can work with brokers to understand the needs of their clients and help them get their finances back on track.
This is particularly important if their situation is likely to be temporary, rather than permanent as taking out a first charge mortgage specifically tailored to help borrowers with a minor credit default, or a second charge that can be used to pay off debt and make their payments more streamlined and manageable.
Surge in specialist
The number of borrowers seeking specialist lending solutions has risen in recent years, with the second charge sector in particular seeing a surge in growth as more brokers and borrowers begin to acknowledge the benefits of this capital raising tool.
In fact, the recent announcement of the inaugural National Mortgage Awards – Second Charge is testament to the sector’s continued growth and success as it marks the first time the achievements of this specific market are being acknowledged at a standalone event.
Second charges in particular can often prove to be an excellent option for borrowers looking to capital raise in order to pay off debt by providing an alternative to remortgaging for those left with time still to run on their first charge mortgage.
This is especially true for those who may have taken out a longer 5-year or 10-year fix and still have a preferential fixed rate on their first charge mortgage.
In which case, remortgaging onto a more expensive deal and losing the lower rate on their first charge loan would make little sense.
Of course, for those borrowers with a minor credit default history coming to the end of their current deal or encountering problems securing a mortgage with a mainstream lender, then a first charge loan designed specifically to meet their needs is likely to be the more suitable option.
For brokers needing help or further information in addressing these challenges, speaking to a specialist lender with the knowledge and expertise in this area will help them find the solutions they need in order to meet their clients’ requirements.
David Binney is head of sales at Norton Home Loans
