We are in a tricky position at the moment. Borrowers are feeling the pinch. But, as high street banks struggle to adapt, specialist lenders are primed to emerge as saviours of the market.
There is a historical precedence to support this too. Where the financial world was brought to its knees in the past, specialist providers performed surprisingly well. They increased their lending volumes by over 300% between 2009 and 2021.
This means they lent in the immediate aftermath of the credit crunch, during Brexit negotiations, and throughout a global pandemic. In fact, between 2020 and 2021 alone – the peak lockdown period – specialist lending rose by 32%.
Their flexibility allows this to happen. Specialist lenders look beyond a borrower’s financials – in both good times and bad. Rather than taking a black or white view, they understand how complicated the world can get. Rather than focusing on the adverse credit history, they will explore an applicant’s business acumen, wider assets, exit strategies and more to get funding issued.
This is a whole world away from the rigid, tick-box lending criteria offered by the mainstream. The need for this flexibility will come to the forefront over the coming months. Credit ratings are set to take a hit. The cost-of-living crisis shows few signs of slowing down and it is taking a toll.
Inflation is sitting in the double digits, with the Consumer Prices Index reaching 10.1% in September. In case you need reminding, the official target is 2%. There is little people can do to circumvent these rises either.
It is the cost of our essentials that are rising the fastest. Food and drink; electricity and gas; and clothing costs contributed to the fastest annual jump in prices seen in 42 years. We are heading into the colder months – families will need to turn the heating on and invest in warmer cloths at some point.
We know what happens when these kinds of crises emerge. As Covid-19 pumped the breaks on our economy, some 3.2 million brits fell behind on their bills. Credit card debts, rent, personal loans, and mortgage repayments were missed en masse.
It does not stop with missed payments either. County Court Judgements get issued. Consumers become tempted by buy-now-pay-later schemes to cover the basics. As desperation rises, so too do adverse credit ratings.
As we face down new challenges, our ability to manage will be stretched once more. Just over 1 in 10 adults have missed an energy bill payment in 2022. This rises to nearly 1 in 3 for those aged 18 to 34. The age range where people start thinking about getting on the housing ladder, or starting a family.
A picture is already forming on how much appetite high street banks have for all this. Mortgages have been pulled from the shelves, with more deals set to be withdrawn. Lenders expect the amount of both consumer and corporate credit products to shrink as defaults rise.
But, while things may appear bleak, there is still plenty of demand out there. Borrowers are being proactive in finding solutions. Searches for lenders that accept those with late or missed payments on their record skyrocketed in September. Opportunity abounds for suppliers who can deal with economic uncertainty.
Specialist lenders can take a stand once again and support worried buyers, just as they did in the past. Their adaptability will allow funding to continue, just as mainstream banks raise their barriers to entry. Borrowers may still be accepted with CCJs, missed payments, and other blips on their record.
We’re facing an unclear future. But specialist lenders may be able to illuminate the path ahead.
| With over 15 years of experience, Market Financial Solutions provides flexible bridging loans and buy-to-let mortgage solutions to the specialist finance market. The bespoke service with an affordability & common-sense approach helps individuals, companies and partnerships to provide flexible property finance, however complex the circumstances. |
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