Newsnight features MS research on the impact of payday loans

BBC Two’s Newsnight last week featured research from Mortgage Strategy which shows almost two-thirds of brokers have had a borrower turned down for a mortgage because they have had a payday loan.

Earlier this month, Mortgage Strategy asked brokers: “Have you had a client with a payday loan who has been turned down for a mortgage in the past year?”.

Amazingly, a massive 63.6 per cent of the 289 respondents – 184 brokers – replied ‘yes’.

Newsnight used the poll as part of an investigation into the payday loan sector.

As part of the investigation, it interviewed Chadney Bulgin mortgage partner Jonathan Clark, who said he has previously had a couple turned down for a Help to Buy mortgage because they had multiple loans from Wonga.

Clark told the show: “I knew it [the payday loans] was going to be a bit of a problem but I was a bit shocked by the response I got. One or two [lenders] said they could be acceptable subject to a credit score – which is a polite way of saying it probably won’t work – but most of them were very negative and said it would be an instant decline.

“And that was regardless of their income, their conduct of their accounts and everything else. These were major high street lenders.”

Newsnight’s Jeremy Paxman asked business secretary Vince Cable whether he thought it “fair that people endanger their chances of getting a mortgage simply because they have taken out a payday loan, whether they have had a difficulty repaying it”.

Cable replied: “It isn’t fair on the basis you have put forward. Now that industry is being properly regulated that should stop.

“And one of the key steps in the regulation is regulating advertising, so the advertising will require a company doing a payday loan to make it clear that borrowers have to seek debt advice. And if they seek debt advice, they will know the risk of imperilling their credit status.”