Dale Jannels is danaging director at Impact Specialist Finance
The financial impact of COVID-19 is likely to be experienced in many different ways by many different people for quite some time.
This virus has changed the way we live our lives and is also shifting boundaries and emphasis across the mortgage market. We’re already seeing this from an advice perspective as lending propositions and individual borrowing scenarios are becoming ever more complex due to influencing factors such as mortgage payment holidays, furlough and a challenging economic landscape.
It’s inevitable that, through no fault of their own, individuals and businesses have struggled throughout this time, and will continue to do so. Struggles which are leading to an increase in personal debt, additional blips on credit histories and fluctuating income levels which are inflating the need for financial advice across the board.
The importance of the advice process was recently outlined in a survey from Pepper Money which suggested that two thirds (66%) of people with adverse credit who intend to buy a property in the next 12 months would seek the advice of a broker.
When the study last took place in February 2020, 57% of people in this group said they would talk to a broker and the equivalent research 12 months ago found that just 40% would seek professional advice. When it came to finding a broker, 53% of respondents said they would carry out online research, with almost half (45%) saying they have an existing relationship with a broker.
The most common reason for choosing a broker was a recommendation from friends and family. This has steadily increased in importance over the last 12 months. Last year, 36% of the group cited recommendations from friends and family as a reason for choosing a broker, this increased to 48% in February, and in the latest report it has risen again to 55%.
The statistic of 66% is a key one and it is only likely to increase due to the aforementioned factors. When it comes to servicing these needs from a lending standpoint, we need more lenders who don’t credit score and have a more human approach in terms of being able to have sensible conversations with intermediaries and their clients. Such an approach will generate a different level of understanding around the types of life events which can lead to credit blips and build a bigger picture so lenders can come to practical and responsible decisions around past, present and future borrowing capabilities.
Transparency remains vital when advertising the requirements needed from certain borrower types and ensuring that these are clear and readily available in their product guides. Some lenders still provide a matrix which is difficult to understand and this is maybe why some brokers continue to shy away from this product area. One of the key areas the intermediary market should also be looking at is communication defaults.
Some specialist lenders will now ignore these up to a certain level, meaning it’s really down to brokers to explore all available avenues for such borrowers.
There’s a huge amount for brokers to consider in the current climate. Many specialist lenders are doing a great job supporting them and their clients through these challenging times but there’s always room for improvement.
And for those brokers who don’t have relationships or experience of working with specialist lenders then additional support from specialist packagers is readily available to ensure that all the needs of clients with adverse credit can be met.