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The impact of unsecured credit events on residential borrowers
It’s well stated that the cost of living has increased, and effects of the pandemic in terms of live events such as unemployment, redundancy, health concerns and relationship changes are ongoing. But how are those factors truly impacting the short-term credit payments of borrowers?
According to the Guardian, more than 2 million households are reported to have missed a bill payment every month this year. In addition, the monthly insight tracker from consumer group Which? estimated that June saw 2.1 million households miss or default on at least one mortgage, rent, loan, credit card or bill payment, a figure which has remained above 2 million every month so far this year.
The tracker also found that six in 10 consumers have had to cut back on essentials or dipinto savings to cover essential spending. That figure is much higher than a year ago, when it was around 40%.
Most consumers across all income groups said they had made an adjustment to cover essential spending in the past month, but this was most common among households with an income of up to £21,000. However, 57% of consumers with a household income of more than £55,000 were said to have made at least one adjustment.
These are trends which we, as lenders, are carefully tracking to ensure that our residential mortgage product range and criteria evolves accordingly – so we continue to provide responsible and appropriate solutions for credit-worthy borrowers who may have been impacted by unsecured credit-related events during this period.
The payment struggle is also evident in other areas which may also impact credit ratings and profiles.
Research from KPMG found that almost a third (29%) of individuals have struggled to pay for their media subscription services since the start of 2022.
The survey of UK consumers conducted by OnePoll found that 15% have missed or defaulted on a payment for a media subscription service in the last three months.
In response to this, we at Foundation have reappraised our existing credit tiers to more accurately reflect the position of these borrowers, allowing for a wider range of blips in unsecured credit in the last two years specifically. We have also introduced a new F4 range, and jointly, this should open up our products to a broader group of customers and deliver better pricing options for many.
If you have a borrower who does not meet mainstream criteria, please contact us today.
Sources:
https://www.theguardian.com/business/2022/jul/06/cost-of-living-2m-households-missed-bill-every-month-this-year
https://home.kpmg/uk/en/home/media/press-releases/2022/07/a-third-of-consumers-use-savings-to-cover-the-costs-of-media-subscriptions.html
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