Near prime borrowers need more options from mortgage lenders

The last few years have been particularly testing financially for many people in the UK. From the pandemic to the cost-of-living crisis, there have been plenty of borrowers who have experienced some level of issues with their money management, potentially resulting in missed payments, defaults or CCJs.

Unfortunately, these issues, even if they are historical in their nature, can make it incredibly difficult for these clients to access the mortgage funding they need.

As a result, brokers may have to work all the harder to identify lenders that can provide the necessary support to near prime borrowers, knowing full well that they are excellent prospects but are being excluded or limited by a one size fits all approach by some mortgage lenders.

What’s my score again?

One of the hurdles that can prove particularly troublesome for certain borrowers is credit scoring. If there is some sort of issue in their past, such as a default or a missed payment, then this can impact their score, with the inevitable knock-on effect of damaging their borrowing chances thereafter.

This is certainly true if they look to get a mortgage from a lender who relies on a check-list approach, putting the borrower’s credit score at the heart of their assessment.

However, focusing on a credit score is a very narrow way of judging an application; it rarely tells the whole story.

That’s why for our near prime range we take a more holistic approach, which allows us to get a better impression of the borrower’s true position. Our decision is controlled solely by our set policy rules - the applicant’s credit score doesn’t even feature in the decision.

Moving swiftly

Time is of the essence for all mortgage borrowers, irrespective of their credit position. But it’s an unfortunate truth that near prime lending is often done by specialist lenders who have manual processes that don’t take advantage of technology and automation. This can lead to them dragging their heels to the point that those looking to refinance may risk dropping onto SVR and the payment shock that brings with it.

We take a different approach at Atom bank. We put our market-leading technology to good use, with a current average of 40% of our cases, including near prime, utilising automated valuations and automated income verification. As a result, over 10% of near prime cases get a same or next day, credit backed, mortgage offer, with half getting a decision in less than a week.

It means that we are treating our prime and near prime customers in exactly the same way, opening up the potential for a much swifter resolution to their mortgage search and avoiding those repayment risks.

Delivering for different types of near prime borrowers

Another complaint we often hear from brokers is that many lenders are quite limited when it comes to the options for borrowers with some sort of adverse credit, in that there may only be a product or two to choose from, with little variety on offer.

As intermediaries know only too well, borrowers come in all sorts of different shapes and sizes, and the sort of mortgage that will best suit them can vary significantly. That’s been a driving factor behind Atom introducing some diversity into our near prime range, including deals that are available on a fee or fee-free basis or that offer free legals and valuations.

If lenders are to truly support near prime borrowers, that means embracing the same level of innovation and creativity when building products for them as happens for borrowers with impeccable credit records.

What brokers and borrowers need

The challenges of the last few years have undoubtedly had an impact on the finances of aspiring borrowers across the country.

However, the fact that there have been historic issues does not mean that these borrowers should not have the same access to mortgage products and industry innovation, simply that they need a more considered and understanding approach from mortgage lenders.

That’s why it’s so important for brokers to work closely with lenders who focus on such an approach so that together we can continue to deliver for near prime borrowers just as we do for those with a spotless credit history.