Demand for specialist mortgages has risen significantly over the last few years as a growing number of borrowers have found themselves falling foul of mainstream lending criteria.

Driving this growth is the fallout of the global financial crisis, the Covid pandemic and the cost-of-living crisis, all of which have played a significant role in the financial challenges facing many borrowers.

The result of this has been an uptick in the number of people falling into arrears or experiencing a minor blip on their credit record, some for the very first time. In some cases, this may be due to the borrower failing to make a credit card payment, while in others it may be because they have missed a payment during the term of their last mortgage.

In fact, recent figures from the Bank of England shows the amount of arrears on mortgages rose 4.2% to £21.3 billion in the first three months of 2024 as homeowners struggled with the impact of a higher rate environment. Overall, outstanding arrears were 44.5% higher than the same period 12 months prior – the highest total amount of arrears recorded since 2014.

For advisers working in the mortgage market, this uptick in arrears can present something of a challenge, especially if they have little or no experience dealing with clients with this type of credit record. Yet shying away from these borrowers is also not an option, particularly given the rise in the number of borrowers with this type of credit profile.

It’s not just new or younger clients that may come with a history of credit blips either. Many advisers could also find that some of their existing clients, many of whom may have previously been considered vanilla or mainstream borrowers, are now approaching them with some degree of adverse credit picked up in the intervening time period since they were last seen.

This could simply be due to a change in personal circumstances, such a job loss, a reduction in working hours or separation and divorce – all of which can have a significant impact on a borrower’s finances.

It is here that the specialist lending market can offer solutions specifically aimed at meeting their needs. Unlike in the mainstream, where automated underwriting processes are used, specialist mortgage lenders manually underwrite each application to meet the individual needs of each borrower.

This enables them to better understand the borrower’s credit history and the reasons behind any defaults and work towards finding a solution to help them get back on track.

Of course, specialist lending isn’t just about adverse credit or those with a history of credit defaults either. The market offers solutions to any borrower that falls outside the realms of mainstream lending, such as those with irregular or unusual income streams like the self-employed, contractors or those working in the gig economy.

There are also options for first-time buyers and working professionals who are struggling to save for a deposit, such as shared ownership or a joint borrower sole proprietor mortgage that enables the borrower to join forces with family or friends to boost borrowing power to get on the property ladder.

All these different but increasingly common scenarios fall under the specialist lending umbrella, which means advisers are more likely to encounter clients with these types of borrowing needs in the future.

Navigating this area of the market for the first time can of course, be daunting, particularly for those advisers unfamiliar with the specialist lending market, which is where a network like The Right Mortgage can help.

Being part of a network can offer advisers the support, guidance and expertise needed to explore the wider range of flexible lending options available in the specialist lending sector and ensure they continue to meet the needs of their clients.

Not only can this help them to build stronger relationships with both new and existing customers, it can also enable them to continue to grow their business in an ever-changing mortgage market.

Anita White is head of provider and lender relations at The Right Mortgage and Protection Network