Loughborough Building Society has changed its lending policy to and will now accept applications up to 95% loan-to-value (LTV) where borrowers have ‘unsatisfied defaults’ on mail orders, utility bills, bank accounts, car insurance and telecommunications.
According to Newspage Agency, the lender has programmed its systems to accept these cases with ‘no explanation is required’.
Taking out a mortgage with adverse credit can be very tricky and having an unpaid bill can cause a blip which will trigger an instant rejection from most lenders – but not all.
Loughborough’s move is significant because it has set its systems to approve applications without explanation and with no need for a referral. Mortgage brokers say this could be an indication some lenders may be starting to take a more open view on credit problems.
Ranald Mitchell, director at Charwin Mortgages speaking via Newspage, explained: “Loughborough’s criteria tweak is bold and pragmatic. While some specialist lenders already take a lenient view on minor defaults for essentials like phone bills or mail orders, removing the need for referral or explanation sets this apart.
“It reflects a growing acceptance that not all adverse credit is equal. With many borrowers still managing the legacy of easy credit, rising costs and stretched finances, adverse credit is becoming more normal.
“Lenders that fail to adapt may find themselves out of step with today’s market reality.”
Indeed, the cost-of-living crisis has meant more people have been forced into financial difficulties through no fault of their own, rather than being irresponsible. Emma Jones, managing director of Whenthebanksaysno.co.uk said Loughborough’s change takes this into account.
Speaking to Newspage she said: “I think it’s going a bit far to suggest that ‘adverse’ is the new normal. That said, there are plenty of cases where clients have been impacted by relatively minor credit blips due to life events, enough to take them out of scope with high street lenders.
“Loughborough’s move to open up their criteria to account for minor credit blips shows that some lenders are beginning to take a more balanced view on credit issues, which is definitely a step in the right direction. Not everyone has credit issues because they were careless. Sometimes life hits hard.”
