"Missed payments can see applications turned down, and this year’s Specialist Lending Study found that 8.38 million people have experienced adverse credit in the last three years."
- Ryan Brailsford, director of business development at Pepper Money
The latest Pepper Money Specialist Lending Study found that 41% of people have increased their unsecured borrowing in the last 12 months. This is supported by The Bank of England’s findings, which revealed demand for credit card lending increased in Q2.
According to the study, nearly 1 in 3 people (30%) have outstanding debts of more than £5,000, with 10% saying their unsecured borrowing is more than £15,000.
The research also found that 44% of those who have used Buy Now Pay Later borrowing say their amount of debt through these services has increased in the last 12 months.
These rising levels of unsecured borrowing are dampening hopes of getting a mortgage, with 42% being concerned that their level of outstanding debt will negatively impact their mortgage aspirations.
Ryan Brailsford, director of business development at Pepper Money, said: “There are many factors that could see a mortgage application declined by a high street lender only to be approved by a specialist lender, who have expertise in underwriting more complex cases.
"Missed payments can see applications turned down, and this year’s Specialist Lending Study found that 8.38 million people have experienced adverse credit in the last three years. Outstanding unsecured debt is another reason why a customer’s circumstances could be considered ‘just-off-high-street’ as many lenders will impose a limit on the debt-to-income ratio (DTIR).
"At Pepper Money, we don’t impose a cap of this nature. Instead, we assess every mortgage application on a customer’s ability to maintain their payments in a sustainable way. This means we can provide an excellent choice for those customers whose circumstances mean they just miss out on a mortgage from a high street lender.”
Wayne Smethurst, director at All Money Matters, commented: “Affordability has long been one of the major challenges for customers who want to buy their first home or trade up to the next rung on the ladder. In recent months, we’ve seen a definite upward trend as so many people have increased their unsecured borrowing during the cost-of-living crisis, and these outstanding debts can significantly reduce the size of mortgages available to them or see them being rejected altogether. This is why it’s so important that lenders like Pepper Money take a more individual approach to assessing income, without binary limits for DTIR. By working with lenders that make decisions based on a customer’s true ability to maintain payments, we can provide options to help them achieve their goals, even when they have been declined by a high street lender.”
