Concerns regarding mortgage affordability have been a key topic in the industry over the last 12 months, as higher interest rates and increased living costs have reduced the disposable income of many borrowers.
This has led to a rise in the number of borrowers struggling to meet the affordability requirements of mortgage lenders. For some, this may mean an inability to remortgage onto a better rate, while for those looking to buy, it has resulted in borrowers being declined outright for a mortgage.
An impact of the increasing cost of living has been a rise in the number of borrowers with a history of missed payments, defaults, or other forms of poor credit. Some of these may have been one-off occurrences, perhaps a first-time offence, while others may have faced repeated instances as they adapted to changing circumstances.
Either way, any credit blips are likely to prove problematic when trying to secure a mortgage and may result in borrowers being turned away by lenders, particularly high street banks.
REPAIRING CREDIT WITH FLEXIBLE UNDERWRITING
As a lender dedicated to helping borrowers who may have experienced credit challenges in the past, Mansfield is well-positioned to help these clients by providing accommodating criteria and a more personable approach to underwriting to help them manage their finances.
Our five-year fixed rate Credit Repair mortgage to 31 March 2030 is specifically aimed at borrowers who have experienced such challenges. Circumstances can include those who have been discharged bankrupt from day one, those with existing IVAs and or borrowers with up to £6,000 in CCJs over 12 months old.
The product is also available to borrowers in an active DMP older than six months; those with previous repossessions over two years old, and borrowers with defaults as recent as four months ago.
THE BENEFITS OF LONG-TERM FIXED PRODUCTS
Whilst borrowers might want to also consider variable rates, long-term fixed-rate mortgages can be a good option for borrowers with poor credit histories because they offer predictable, set payments. They also provide borrowers with an opportunity to repair their credit history, build equity and refinance on a standard mortgage product at a later date.
One of the key benefits of Mansfield’s Credit Repair product though is that it also offers enhanced affordability for those with a poor credit background because affordability is stressed at the pay rate.
With house price inflation and rising interest rates, stress testing the mortgage at pay rate can really enable some to access the borrowing they need, when they otherwise might not have been considered. Having certainty over the monthly payment amount of a mortgage can also be an appealing choice for borrowers while taking steps towards financial recovery.
Not only can reduced stress tests improve access to borrowing, having a fixed monthly repayment can help credit impaired borrowers better manage their finances and get back onto an even keel.
Regularly meeting mortgage payments over a five-year period for example, will also help to improve their credit rating in the long-term and open up access to more products, potentially offering better rates further down the line.
SENSIBLE SOLUTIONS TO HELP BROKERS SECURE MORE BUSINESS
Following the economic uncertainty seen in recent years, the chances are that brokers are likely to encounter more clients with past credit challenges in the future. These clients will need a variety of solutions to help them achieve their homeownership goals.
Working with a lender that offers customer-first solutions to address these borrowers’ specific needs is vital. Not only will this help to help those clients with past credit problems pursue their property purchasing goals with confidence, it can also help brokers to secure more business, while enabling their clients to get back on track with their finances.
