Customers with adverse credit more positive about mortgage prospects, study finds

Customers with adverse credit are more positive about their prospects for a successful mortgage application than they were six months ago, according to new research by Pepper Money.

The specialist lender found that 52% of adults with adverse credit, who are looking to purchase a property in the next 12 months, are concerned about having their mortgage application declined due to their credit history.

As part of its latest Adverse Credit Study, Pepper Money’s findings showed that this has decreased from last autumn when 69% of people with adverse credit and looking to buy a property were concerned about having their mortgage application declined. It also found that only 6% of homeowners who had experienced adverse credit before buying their current property said their adverse credit had resulted in a declined mortgage application.

The study was carried out in association with YouGov and based on a nationally representative sample of 4,242 adult respondents, of whom 508 had experienced adverse credit within the last three years – defined as anyone who had missed credit payments or loans, or had a County Court Judgement (CCJ) or Debt Management Plan (DMP) in that period.

Pepper Money suggested the misconception about the impact of adverse credit on the ability to successfully apply for a mortgage is demonstrated by incorrect assumptions to the impact a CCJ can have on their mortgage prospects.

While 75% of people with adverse credit indicated they know what a CCJ is, 23% of those surveyed think they would have to wait longer than five years to apply for a mortgage after being registered with a CCJ. However, many lenders are able to offer competitive mortgages to customers who have been registered with a CCJ as little as six months ago.

Pepper Money sales director, Paul Adams, commented: “This research is a mix of good news and bad news. It’s great that customers with adverse credit are generally more positive about their chances of getting a mortgage.

“There is, however, still a significant perception gap and areas of misunderstanding about the opportunities that are available for customers with more complex circumstances.

“The good news is that this presents an opportunity for mortgage brokers to help raise awareness and understanding about the options available, and this can help them to reach more customers and build trust.”

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