Urgent demand for financial solutions and debt consolidation, according to Knowledge Bank's data

25 July 2023

The latest criteria index from Knowledge Bank underpins the financial burdens that many are carrying in the UK.

As the UK’s largest database of mortgage lending criteria, Knowledge Bank tracks the most frequent searches performed by brokers as they look to place a client’s case. In a month that saw the Bank of England raise interest rates by half a point to 5% in an attempt to curb inflation, the Knowledge Bank criteria tracker highlights the pressing need for viable solutions to tackle the affordability hurdles and alleviate the hardships faced by individuals in the present economy.

The persistent trend of ‘Missed or Late Payments’ trends for a ninth successive month in the ‘residential’ sector stressing the need to confirm borrowers' payment history and financial stability.

Data from the ‘Residential’ mortgage sector in June reveals an increase in searches relating to the ‘Maximum Age at End of Term’ as brokers and lenders explore ways to help borrowers extend mortgage terms or move to interest-only options on a short-term basis.

This was arguably predictable following Chancellor Jeremy’s Hunt’s recent crisis meeting with banks and building societies, concluding with an agreement to assist borrowers. This should provide some breathing space for the families at risk as well as the 400,000 households due to come off fixed rates between July and September. However, it is likely to significantly increase the number of in-bound calls from borrowers looking for help from brokers or lenders.

This was backed up by searches within the 'Second Charge' sector which also reveal a surge in individuals seeking solutions to their mounting financial issues.

June also saw an increase in searches for lenders who assist homeowners with ‘Capital Raising for Debt Consolidation’ underpinning the financial burden carried by many households. A search for ‘Interest-Only Mortgages’ coming into the top five for the first time since June last year, also shows the pressure people are under to make their debt more affordable.

In the 'Equity Release' category, June searches indicate a notable resurgence in interest for 'Leasehold Remaining Term,' 'Early Repayment Charges,' and 'Ex-local Authority Houses'. These trends suggest that individuals who bought their council flats two to three decades ago, might be exploring their options. It is plausible that pensions are no longer sufficient to cover their expenses, leading more people to explore equity release as a viable solution to ease financial situations.

Another noteworthy finding, appearing in the ‘Buy-To-Let’ sector, sheds light on the difficulties faced by individuals trying to enter the property market. A new term coming into the top five this month was whether lenders would offer buy-to-let mortgages to ‘First-Time Buyers’. This indicates the significant challenge faced by aspiring property owners, who potentially can’t afford to buy a home to live in so want to get onto the property ladder through buy-to-let instead.

These trends signify a growing demand for solutions to address financial difficulties and consolidate debts among homeowners.

In comparison to the challenges in the residential and buy-to-let markets, both bridging and commercial were remarkably consistent, with the same top five searches for the past three months – both leading with ‘Minimum Loan Amount’ and ‘Maximum LTV’.

Knowledge Bank CEO, Nicola Firth, said: “Amidst the mounting financial challenges faced by borrowers, many are desperately seeking assistance with their mortgage terms and additional borrowing for debt consolidation.

“Brokers are exploring options to ease their clients’ financial situation. For borrowers transitioning from a fixed-rate, the prospect of moving to a significantly higher rate is particularly onerous. Broker searches on Knowledge Bank evidence that borrowers are resorting to every possible means to find solutions for their clients. Considering ways to extend mortgage terms, exploring second charge interest-only options, and using second charges to raise much-needed capital for debt consolidation.

“The crucial role of brokers in assisting both existing and prospective borrowers has never been more important. At the same time, brokers are encountering unparalleled challenges in their efforts, as they navigate rates that are being pulled every few days, and an extensive array of criteria to locate a lender capable of providing assistance. The task of finding a lender who can offer the necessary help has become increasingly demanding.”

During the first quarter of 2023 there were over 280,000 searches on Knowledge Bank and over five million criteria searches have been carried out to date.

Criteria Activity Tracker

Top five searches performed by brokers on Knowledge Bank during June 2023

RESIDENTIAL BUY-TO-LET SECOND CHARGES EQUITY RELEASE
1 Maximum Age at End of Term Lending to Limited Companies Maximum LTV / Loan To Value Leasehold Remaining Term / Beginning of term
2 Missed or Late Payments First Time Landlord Minimum Loan Amount Ex-Local Authority Houses
3 Maximum Age at End of Term Using Employed Income Only No Requirement to be a Homeowner Unregulated Buy to Let Early Repayment Charges
4 Employment - Time in Current Employment Minimum Income - Interest Only / Part and Part Single Applicant Interest Only Married Couple Application in One/Single Name
5 Self Employed - 1 Years Accounts First Time Buyers Capital Raising for Debt Consolidation Maximum Age at Application

SELF-BUILD BRIDGING COMMERCIAL
1 Maximum LTV / Loan To Value Minimum Loan Amount Minimum Loan Amount
2 Barn Conversion Regulated Bridging Semi-Commercial Properties
3 Lend in Scotland Maximum LTV / Loan To Value Mixed Use Properties / Part Commercial
4 Credit Repair for Adverse Credit Second Charge Loan Excluded Commercial Sectors
5 Maximum Age at Application Commercial Property Maximum LTV / Loan To Value

Brokers wanting to find out more about Knowledge Bank can visit: www.knowledgebank.uk