"As the cost of living continues to squeeze the household and personal finances of would-be and current borrowers across the country, missed payments are becoming the norm. "
Although inflationary pressures are subsiding, the cost of living crisis continues to put a strain on household and personal finances, with missed payments becoming commonplace as households juggle bills.
Our latest research revealed that nearly one in four (24%) UK adults - the equivalent of more than 12 million people - have missed one or more payments in the last 12 months, up from 18% in 2023. The cost of living crisis was cited by a staggering 64% of respondents as the main reason that they had been unable to pay.
With missed payments on the rise, we’re likely to see an increase in the number of people with adverse credit. These customers often struggle to get a mortgage through a high street lender as their credit profile doesn’t fit the strict lending criteria, and can leave them feeling that they have no other option. Our research revealed nearly three in 10 (29%) adults - the equivalent of 4.8 million people - have struggled to get a mortgage due to previous blips in their credit history, while nearly a fifth (18%) have felt discriminated against by lenders due to their credit history.
This is where brokers have an important role to play, providing these customers with the support they need as well as signposting them in the right direction to lenders who can help them.
Breaking down barriers
As important as the topic of personal finance is, it can be a difficult or sensitive subject to talk about for many, and has historically been considered a societal taboo. Our research highlights these taboos, and reveals there are significant barriers to people seeking financial support should they need it.
Of those who missed a payment in the last 12 months, the top barrier to seeking financial support was not knowing where to begin, and feeling too embarrassed to ask for help (both 29%). This was closely followed by feeling too embarrassed to admit the state of their finances (28%) and worrying about the impact on their credit score (20%).
For brokers, this means creating a safe space for customers to talk about their financial situation without embarrassment while providing them with information about the different options available. Ultimately, it is our duty as an industry to signpost these customers to the help they need during these difficult times and remind them that there is help at hand.
Industry education
As well as creating a safe space for discussions, upskilling and continually educating brokers must be a priority for the wider mortgage industry. In light of Consumer Duty, and as more adverse credit or complex credit customers look to take their first, or next, step onto their housing ladder, brokers must be prepared and educated on the new products coming to the market. Being able to understand adverse credit customer needs, and signpost them to the most suitable options for their unique financial circumstances, will become more important than ever.
Where to next?
As the cost of living continues to squeeze the household and personal finances of would-be and current borrowers across the country, missed payments are becoming the norm. As a result, we expect to see a growing number of customers with adverse credit looking for support, meaning the role of brokers in supporting these customers has never been more crucial. Brokers have a unique opportunity to assist these individuals by creating a non-judgmental environment and offering tailored advice that addresses their specific financial needs.
In a market that is far from one-size-fits-all, the value of personalised advice and a compassionate approach cannot be overstated. Brokers must continue to play a pivotal role in helping customers navigate their financial challenges and find solutions that are right for them, fostering trust and confidence in an ever-evolving landscape.
