Economic pressures, including rising inflation and increased household bills, have created a more complex environment for borrowers. Disposable income, or the lack thereof, remains a concern for many. For example, on 1st January 2025, the energy price cap will rise to £1,738 per year for typical dual-fuel households, while inflation hit a six-month high of 2.3% in October, largely driven by rising energy costs.
Despite these financial pressures, the average UK house price has hit a record high of £300,000, meaning that demonstrating affordability is an increasing hurdle for many customers. Yet, within this complexity lies an opportunity for brokers to prove their value and guide customers toward solutions that address their unique circumstances.
2024 has highlighted the importance of brokers in helping customers navigate these affordability challenges. Our recent Specialist Lending Study revealed that 14% of adults, or 7.34 million people, now earn income from more than one job, an increase from 11% last year. Additionally, 35% of people earn variable incomes, such as bonuses, overtime, or commissions. High street lenders often struggle to account for these non-traditional income sources, leaving many customers underserved. By working with a lender like Pepper Money, brokers can offer tailored solutions that consider the whole financial picture.
This year, at Pepper, we introduced several criteria enhancements designed to make mortgages more accessible to customers who just miss out on a high street lender. We made significant improvements to our self-employed criteria, allowing the inclusion of net profit retained within the business as part of affordability calculations, and our new Concessionary Purchase criteria now allows customers to borrow up to 100% of the purchase price, enabling them to buy properties below market value with no deposit required.
In our commitment to making homeownership more accessible, we also introduced a range of changes to help hopeful home buyers and remortgagers. We now accept up to 5% builder deposits on residential new-build applications, we’ve expanded our AVM tolerance to save remortgage customers time and money on valuations, and we’ve increased the maximum age at the end of the term to 80 years old, with earned income accepted up to age 75. Combined with our maximum term of 40 years, these changes help more customers spread their mortgage costs and overcome affordability challenges.
The continued evolution and wider adoption of our Specialist Lending Study, reinforces the importance of consumer education being paramount to industry growth and challenging misconceptions. A key theme from our Specialist Lending Study released this autumn, was the important role brokers play in educating customers about their options. Many borrowers, for example, are still “sleepwalking” into product transfers without exploring alternative solutions. Our research shows that 64% of borrowers don’t fully understand the difference between a remortgage and a product transfer, demonstrating the need for proactive engagement.
As we look ahead to 2025, it’s clear that specialist lenders will play an even greater role in helping brokers serve customers with complex needs. You only need to look at the headline statistic from our Specialist Lending Study, which revealed that over 15 million people have missed payments and experienced adverse credit at some point in their lives, with 8.4 million people saying they have experienced adverse credit in the last three years.
Whether it’s accommodating multiple income sources, addressing recent credit challenges, or providing consumer centric solutions like Concessionary Purchases, Pepper Money is committed to empowering brokers with the tools they need to succeed.
Together, we can make a meaningful difference for customers, ensuring they have access to the solutions that best suit their financial needs.
2024 has been a year of transformation and opportunity, and we look forward to continuing our journey with our broker partners in 2025.
Here’s to a year of further collaboration, growth, and success.
Paul Adams,
Sales Director, Pepper Money