Inclusive lending has become more important than ever in the wake of the coronavirus pandemic, with income becoming unpredictable for many potential borrowers.
The way we work is changing. Between 2016 and 2019, the UK’s gig economy workforce doubled and it’s estimated that five million people now have multiple streams of income from a variety of different occupations — such as freelancing, food delivery and courier services or car journeys, rather than a standalone wage.
On top of this, self-employment has grown by 25% since the credit crunch and, with changes in pension rules, more people are working beyond the age of 65.
Add COVID-19 into the mix, which has introduced millions more people to remote working and forced thousands of others to seek new employment. This can cause challenges in affordability assessments and requires a more individual & inclusive approach from lenders.
Providing solutions for real people
I believe inclusive lending is about being able to offer mortgage products to those customers whose circumstances see them sit outside the criteria of high street lenders, whether this is due to adverse credit, complex income, or their type of employment.
This is more important than ever as, for many people, income has become unpredictable, in the wake of the coronavirus pandemic.
It’s difficult for an automated underwriting system to take varying and more complex income into account or to understand the reasons behind potential changes in the way the applicant has earned their living. Thankfully, specialist lenders like Pepper Money are fully equipped to take a more pragmatic view as we have always manually underwritten our applications and the direct access we give our intermediary partners to our team allows them to give us the detail and for us to gain comfort from their explanations.
I’ve had many conversations recently with intermediaries who are giving specialist lenders a try for the first time. They understand that many of their previously mainstream customers are now finding themselves needing the expertise and the more forgiving criteria that we’re able to offer. Due to operational restraints, many mainstream lenders have pulled back on their lending criteria and tightened their credit scores, but specialist lenders have filled the gap and will continue to support those customers as we emerge from the effects of the pandemic.
Supporting an increasingly self-employed workforce
This includes the growing number of self-employed business owners and contractors who will be looking for mortgages over the next 12 months.
It’s clear to us that, for many, there has never been a larger life event than COVID-19 and these customers may struggle with mainstream lending, due to their newly established employment status and lowered credit score. We’re able to help them to rebuild their credit with products like our Light range created specifically for those who don’t have CCJs (but may have missed or late payments over the last few months on their unsecured credit commitments).
Pepper Money has always been strong in the self-employed market, accepting one year’s trading on application and taking the latest year, rather than an average, for affordability when customers have been trading for longer. As many self-employed applicants will have been affected by COVID-19 in one way or another, their options are currently limited with mainstream lenders whose more rigid criteria can’t fully assess their individual circumstances and sees them unable to lend to certain industries.
The right choice for a changing workforce
There’s a huge opportunity for brokers to help their customers through these changing times, utilising their knowledge and relationships with specialist lenders like Pepper Money. Our case owners assess each case individually and talk through the circumstances the customer is in with you to find a resolution and it was great to see our efforts highlighted recently by Mortgage Broker Tools, who praised Pepper Money on our approach to affordability when it comes to self-employed customers and business owners.
With the applications we work on each day, we can see where we’ve really made a difference in somebody’s life. Whether that be assisting them with the purchase of their dream home, or a remortgage that has helped them get their finances back on track, we’ve been able to help them where others couldn’t and be part of them realising their financial goals.
If you have a case you’d like to discuss, or would like to learn more about Pepper Money’s offering for self-employed individuals, get in touch with Ryan Brailsford on LinkedIn or find more information on our official LinkedIn and Twitter pages.