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Meeting the needs of credit-worthy borrowers
The financial landscape has shifted dramatically in recent years, leaving many individuals facing challenges that go beyond the scope of traditional lending criteria.
Rising living costs, increased reliance on credit, and a broader range of income and employment scenarios have made it more difficult for many credit-worthy borrowers to access the financing they need. However, minor credit blips, fluctuating incomes, or employment patterns that don’t fit the more ‘conventional’ lending mould should not exclude borrowers from realising their property aspirations.
Credit-worthy individuals aren’t solely defined by isolated financial events, they are often managing their finances responsibly despite external pressures, including escalating costs of living and high interest rates.
According to recent data from The Money Charity, consumer credit has grown by £14 billion in the past year. All of this credit needs to be serviced and comes against the backdrop of interest rates remaining high, despite the recent reduction in the Bank of England Base Rate.
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The average credit card interest rate sits at 19.83%, higher compared to the Base Rate in October 2024. Annual interest payments per UK household average £2,855 and £1,501 per person, equating to 4.14% of average annual earnings. Meanwhile the Consumer Price Index increased to 2.3% in the year to October 2024, largely due to rises in gas and electricity prices.
These figures highlight the challenges and resilience of individuals striving to balance their financial commitments. They also support the need for specialist lenders to provide solutions that recognise the full picture of a borrower’s past, present and even future financial situation.
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By focusing on solutions that consider layers of complex income, employment history, and previous credit events, specialist lenders can empower credit-worthy borrowers to secure the financing they need and not be penalised for ‘unusual’ circumstances that may fall outside the rigid frameworks of mainstream lending.
Mortgage intermediaries are crucial in connecting borrowers with these solutions. By partnering with specialist lenders, intermediaries can open the doors to a range of products designed to support clients who may otherwise be overlooked. This collaboration not only helps borrowers achieve their homeownership goals but also strengthens the intermediary’s role as a trusted adviser in an increasingly complex financial landscape.
As we approach 2025, driven by ongoing economic uncertainty and rising living costs, the needs of credit-worthy borrowers will continue to evolve. Recognising this diversity and equipping intermediaries with the necessary tools and expertise can help achieve a greater array of positive client outcomes and support growth within the specialist residential market.
*This article was originally published on The Intermediary
References:
https://themoneycharity.org.uk/the-money-stats-november-2024-incomes-battle-
expenditures-as-winter-approaches/
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