Mortgage Soup fires the questions at Richard Harrison, head of mortgages at Atom bank.

Mortgage Soup (MS): Atom bank recently introduced new tiers of Near Prime products, with a £1,500 fee and £1,995 fee respectively. What led to those moves?

Richard Harrison (RH): Like any good lender, we speak regularly with our broker partners to get a better sense of what their clients need, and where there are gaps. And what has come through consistently is just how highly they value having a wide range of options, since it makes it easier to find a format and package that works for an individual borrower.

That initially led to the introduction of our Near Prime £1,500 fee range. Because the fee is a little higher, it means we have been able to drop the interest rate, and these products have proven really popular with those with larger loan amounts and those looking to minimise monthly payment.

Since we launched, they have accounted for a huge chunk of our Near Prime activity – a great indication of how they are meeting a need. We’ve now expanded the range to include £1,500 fee options at more loan-to-value (LTV) points, to ensure we can work with as many Near Prime borrowers as possible, as well as introducing a new range at the £1,995 fee point

Of course, choice is only worthwhile if the products on offer are well priced. I’m pleased to say this year we have acted really quickly to pass on swap rate savings whenever possible, so that our Near Prime range is always delivering value.

MS: Does Near Prime represent an opportunity for brokers?

RH: Absolutely. The last few years have meant plenty of households have experienced pressure making payments, often only on a temporary basis. But the effects of that pressure, whether that’s some late payments or defaults, can be far more long lasting.

These borrowers are perfectly able to handle a mortgage, but no longer fall within the bounds of Prime criteria, which is why Near Prime is such a powerful option.

Brokers need to identify lenders who can deliver, even at higher LTVs – earlier this year we increased our maximum LTV on Near Prime to 90%, allowing us to support a much broader range of potential borrowers.

It’s important for brokers to think of the future too. The client won’t necessarily be Near Prime forever – which lenders are able to provide finance today, but can also make the transition back to Prime status as smooth as possible?

Near Prime also represents an opportunity for lenders to raise their game. We recently published our inaugural Near Prime Index, bringing together economic analysis, our own customer data, and the insights of brokers. What shone through was the need for lenders to be more adaptable, rather than hiding behind ‘computer says no’ decision-making, and actually treat each case on its own merits.

Brokers see some lenders treating all forms of adverse in the same way, and it’s an approach that no longer works.

The reality is that if a borrower has missed a car parking fine or been late for a bill or two, that’s not the same as someone who has developed more long-lasting payment issues, and so they shouldn’t be handled in the same way.

MS: To what extent are Near Prime borrowers treated differently from Prime borrowers?

RH: First and foremost, there’s the question of access to mortgage finance. A significant number of lenders aren’t interested in working with borrowers who have an imperfect credit score, even if the issues were relatively minor or short-lived. That means more limited choice.

But the actual process can be different too. One of the big frustrations we hear about from brokers is the way clients with imperfect records can miss out on some of the best elements of a lender’s service proposition.

All too often lenders focus their innovations solely on Prime borrowers, effectively treating Near Prime borrowers as a second class concern.

That’s obviously unfair, and something we have looked to avoid. So AVMs are available on Near Prime cases at Atom bank, while AIV has recently been extended to Near Prime too. In addition, document assessment SLAs are the same across both Prime and Near Prime.

The idea that Near Prime is some sort of alternative, niche, area of the market seems utterly outdated to me. Brokers are seeing these clients every day, and they need lenders who want to deliver a fast, smooth experience, irrespective of the borrower’s credit score.

MS: Can lenders go further to help borrowers regain Prime status?

RH: It can be quite easy to fall into the trap of viewing a Near Prime borrower as being permanently in that category. But the reality is that they might have had a short-term problem, they’ve put it behind them, and over a relatively short period of time can move back to Prime status.

The key for lenders, and for brokers as well, is to make that journey, that path to Prime if you like, as straightforward as possible.

And it’s really important for lenders to recognise when progress has been made. If one of our Near Prime borrowers has improved their status sufficiently, and meets the criteria, then when their existing rate matures they will be offered a Prime renewal rate automatically.

They don’t have to jump through additional hoops, they just benefit from what will be a better rate as a matter of course. That’s not something specialist adverse lenders will be able to deliver, so it’s a really valuable element to our proposition.

We are seeing it in practice too – over the last year the majority of Near Prime borrowers have been offered a Prime rate at remortgage time, which demonstrates just how effective the support to date has been.