The Impact of ‘Credit Blips’ on Mortgage Accessibility and Interest Rates in the UK

Tuesday, August 29th, 2023

As many homeowners in the UK are unaware of the potential impact that a ‘credit blip’ could have on their access to mortgages, we believe it is important to alert prospective borrowers so that they might then be able to mitigate or even avoid the frustration and disappointment that can otherwise result.

The Role of Credit Scores and Any Adverse Factors in Mortgage Lending

Many mortgage lenders across the UK rely on an initial ‘credit score’ to assess whether they will consider lending. A credit score is likely to be impacted by many adverse factors and most borrowers understand that serious issues such as a county court judgement (CCJ), defaulted account, individual voluntary arrangement (IVA), and bankruptcy will either impact their ability to secure a mortgage or at the very least result in a higher interest rate being offered by a lender.

Don’t Underestimate the Effect of Missed Payments and Limit Breaches!

That said, it seems that many prospective borrowers do not view missed payments or exceeding an overdraft or credit card limit in the same way and consequently do not take either as seriously. From a lender’s viewpoint, however, any missed payments and limit breaches will also impact credit worthiness.

This is an important consideration where existing borrowers who may have been struggling to maintain their commitments and/or household expenditures due to recent well publicised events, have chosen to “miss the odd payment or two, a decision that may then have repercussions when remortgaging.

Specialist Lenders for Applicants with Imperfect Credit Histories

The good news is that there are specialist mortgage lenders who will still consider applicants with a ‘less than perfect’ credit history and lenders who still do not use a credit scoring technique to assess applicants.

That said, to offset what they see as an increased credit risk, these lenders will most likely charge higher mortgage interest rates and/or make a smaller or reduced mortgage offer.

Identifying Suitable Lenders Using a Qualified Mortgage Broker

Note though that some specialist lenders are not available to the public, so accessing them may not be an option without an introduction. This is one reason why many with complex or challenging circumstances may be best served by utilising the services of a knowledgeable and experienced mortgage broker.

A suitably qualified mortgage adviser will in any event know which lender(s) are likely to consider a client’s individual circumstances, and more importantly, those that will not. In some instances, this can significantly shorten the process of finding a suitable lender and remove the inevitable frustration where a client independently tries many lenders only to be declined, sometimes without a specific explanation.

Your Friendly Birmingham Mortgage Broker to the Rescue!

If you would like to know more or have any questions in relation to the issues raised above, please call one of our friendly mortgage experts here at Caboodle Finance of Sutton Coldfield, Birmingham on 0121 308 9114 or alternatively, click HERE to complete our online enquiry form and one of our friendly team will be in touch.

We look forward to hearing from you.

_{The information contained above was correct at the time of publication but is subject to change.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.}