Brokers - can we talk about missed payments?

Journalist: John Fitzsimons, Freelance

ended 14. June 2022

Morning brokers

According to data from Knowledge Bank (https://www.mortgagesolutions.co.uk/news/2022/06/09/rise-in-broker-searches-for-missed-or-late-payments-as-cost-of-living-bites/), intermediaries are increasingly searching for lenders who will accept applications from clients with missed or late payments.

It would be great to get an idea of the scale of this issue within your own businesses. What sort of proportion of clients are you seeing who have a missed/late payment or two on their record? Is that proportion increasing at the moment?

It would also be good to get a sense of what lenders' attitudes are like regarding these clients at the moment. Are there any that stand out as being particularly good or bad? And is this something that lenders are going to have to be a bit more flexible on if the cost of living situation gets worse?

Thank you, as always!

6 responses from the Newspage community

Recently we've seen an increase in missed or late payments. Often it's revolving credit such as credit cards & BNPL, or they're late payments and, sometimes, arrangements to pay relating to utility bills. It's a trend that will likely continue and worsen towards the end of the year as the energy price cap rises again. People are starting to feel the pinch, and many have little to no savings as a cushion to rely on. Most mortgage lenders are very wary of approving a mortgage application if there have been recent missed or late payments; just as crying is a human sign of emotional distress, these markers on your credit file are the equivalent of a person's financial distress. In just the same way, if someone is breaking down, the worst thing you'd want to do is put pressure on them to keep calm and carry on. Mortgage lenders view it precisely the same; if they can't pay their current debt or household bills, adding borrowing on top could quickly make a bad situation worse. While some borrowers get frustrated at this, lenders have a duty of care to be responsible; if you can't afford to pay £100 a month, how will you pay £1000?
We see quite a lot of missed payments on people's credit reports, particularly during the worst of the pandemic. With the cost of living skyrocketing, it's likely missed payments on credit card, utilities and loans will only get worse. If you've more than one or two missed payments in the past 2 years, many providers won't lend. One or two specialist lenders will consider it, but they tend to be more expensive, so very much a last resort.
We've not really noticed an increase at the moment but you get the sense that it's brewing. Everyone is feeling the squeeze but there are lenders who will accept people who've had issues - the best bet for consumers if they're worried is always seek professional advice as early as possible.
The increase has been a gradual one but now with BNPL companies like Klana who are now reporting to credit reference agencies we will see an increase on short term finance and a higher risk of missed payments. Many arent aware the impact a missed payement will have on getting a mortgage. If you cannot make repayments on your something as small as that how will a lender expect you make repayments on one of the biggest purchases you will ever make
I have personally seen an increase where missed payments are happening, typically on utility bills or unsecured credit, and potential borrowers may not realise the impact of this as it shows a lender you are not a safe bet if you can't pay your water bill; how can they have faith you pay your mortgage on time and lenders have a duty to lend responsibly lenders do have a flexible approach as a life event could be a reason for a missed payment but having multiple missed payments. can in most likely lead to being refused for a mortgage and with more and more buy not pay later companies popping up the issue is likey to get worse before it gets better.
I think missed payments are becoming much more common than what they were. If I compare credit reports I see now to what I did 4 years ago it is now far more of a surprise to see a clean credit report. Lenders attitudes are much more relaxed now with so many of them allowing a few missed payments here and there provided they are under a certain amount. I do not think I know of any lenders that outright cannot allow a missed payment or late payment in the last 6 years. I can only see lenders becoming increasing comfortable with this in the coming years and I do see missed and late payments being far more common especially in the lower income families, due to the cost living crisis we are seeing. I would very much like to see lenders scrap the automated credit scores as I find these often decline clients with perfectly good credit without taking an in-depth look at their credit reports. For example I have seen a DIP decline for a first time buyer with only 2 credit cards on their report but had other clients accepted by the same lender based on credit who have missed multiple payments in the last 12 month's on loans.