Mortgages and buy now pay later services

Journalist: Anna Sagar, Mortgage Solutions / Specialist Lending Solutions

ended 20. May 2022

Looking to speak to mortgage brokers about buy now pay later services. 

  1. Have you seen increased use by borrowers of this kind of finance? Are there specific borrower types who are more inclined to use them?
  2. What are lender's attitudes to BNPL? What are the concerns around BNPL currently?
  3. Do you expect attitudes to change?
  4. What advice would you give to borrowers around BNPL?

3 responses from the Newspage community

"Buy now, pay later can be a sure-fire way of getting into financial difficulty and perfectly illustrates the mentality of 'I want it now'. Spreading payments for goods you want but can't afford is a bad habit to get in, both financially and psychologically. Some research found that 41% of those using BNPL cited the ability to spread the cost of payment over time as a key factor, while 30% claimed to use it to pay for purchases they couldn't otherwise afford. Given that the biggest users of BNPL are millennials and Gen Z, who also happen to be a large chunk of mortgage holders or first time buyers, many may find their mortgage capacity reduced, keeping them stuck renting for longer, all to have the latest craze. I know it's old fashioned but save up if you want something. It's both more rewarding and safer."
As ever, these types of finance arrangement are best used sparingly, if at all. It's still got to be paid back, and very rarely there are circumstances that mean you'll have the surplus income later but now not. BNPL mainly services the area of the market that can't currently afford the purchase. Even if circumstances are predicted to change in the short-term, just wait until they do; it's less risk. Perhaps it's a new job which hasn't started yet, you load up the credit on BNPL, then the employer change their mind and the job's gone! BNPL is a key ingredient in a recipe for disaster.
With the "buy now pay later" offerings available in the marketplace, it is so easy to take out fast credit. Can you blame the users, can you blame the providers, as with a night out. If something is laid on a plate for you, with what you believe has no future implications, then a few days later you are scratching areas that are very tender. Then you have made a mistake!! That is how it will feel for potential borrowers when their credit file is checked and they have a few BNPL lenders on their file. They will look at you like the Doctor at the sexual health clinic (I have heard) and ask more questions around your ability to manage your finances. Whilst not as dirty as those evil pay day loans currently, if more people get flagged for this, then who knows how the lenders will view them as the belts tighten on lending.