"Whether through a remortgage or a second charge mortgage, debt consolidation can be a practical and valuable solution for those needing to restructure their finances."
The ongoing cost-of-living crisis has left many households struggling to manage their finances. Rising food and energy bills continue to squeeze disposable incomes, with over half of respondents in Pepper Money’s latest Specialist Lending Study reporting a decrease in their available funds. As a result, 61% of people said they are concerned about their financial situation, while 78% believe the current economic climate will make it harder for them to secure a mortgage in the future.
Debt levels are a growing issue. Almost a third of people with adverse credit have unsecured debts exceeding £5,000, and 41% report that their debt has increased over the past 12 months. Buy Now Pay Later (BNPL) borrowing has surged, with 44% of users saying their debt through these services has grown in the last year. At the same time, the cost of servicing debt is climbing, with many households (15%) experiencing monthly payment increases of £50 or more, further compounding financial pressures. For brokers, this paints a challenging picture — but also highlights a significant opportunity to provide support to customers.
Debt consolidation offers a potential lifeline for customers overwhelmed by unsecured debts. By combining multiple debts into one manageable monthly payment, customers can reduce financial strain, improve their cashflow, and establish more stable finances. This, in turn, can help position them more favourably for future mortgage applications.
Whether through a remortgage or a second charge mortgage, debt consolidation can be a practical and valuable solution for those needing to restructure their finances.
It is worth noting that debt consolidation is not for everyone, and careful assessment is required to determine its suitability for each individual. This is where brokers play a critical role. By understanding a customer’s financial situation and partnering with lenders that take a flexible approach, brokers can help customers find solutions tailored to their needs. At Pepper Money, for example, we do not impose maximum debt-to-income ratios, allowing us to assess each case based on its unique merits and provide more accessible options for customers with higher levels of unsecured debt.
The current financial climate remains challenging, but with inflation beginning to stabilise, households may find they can regain some control over their monthly budgets. Debt consolidation can support this process, relieving immediate pressures and allowing customers to plan more effectively for the future. For brokers, this is a chance to help customers move from a position of financial uncertainty to one of resilience and readiness.
By working together, brokers and lenders can make a significant difference in the lives of struggling households. Debt consolidation, when implemented under the right circumstances, can help customers navigate their current challenges and build stronger financial foundations for the future.
