The rise in CCJs shows the need for adverse credit products
There is not much that surprises me nowadays but recent figures on the number of CCJs awarded last year did. It is not the fact they have been rising that caught me off-guard, but the sheer scale of the jump and what it means for the adverse credit mortgage market.
There were more CCJs against consumers in England and Wales last year than in any other year on record, according to the Registry Trust. At a whopping 912,389, that is a 24 per cent increase on 2015 and the fourth year in a row in which they have risen.
And this is not the only indicator of a latent demand for adverse credit deals. Bubbling underneath is the huge rise in unsecured debt, which reached its highest level in December since the credit crisis, according to the Bank of England.
Citizens Advice helped 435,000 households with problems in managing their essential bills – 45 per cent more than those with consumer debt problems. In other words, the difficulty with managing household expenses is starting to push people to borrow more.
Anecdotally, brokers are also reporting a rise in the number clients with adverse credit, and we all know of the ‘just about managing’ households that could be tipped over the edge by a rise in interest rates.
Many of these households are sitting on low-rate mortgage deals or taking product transfers where they do not need to be credit scored again. Keeping their heads above water, buoyed by ultra-low rates. But it could only take one wave to knock many overboard.
Taking the opportunity to boost your knowledge of the adverse credit lending sector seems like an obvious business opportunity. Or you could partner with a packager that is already there.
This is not a return to the bad old days of sub-prime. Firstly, there is no self-cert in the mix and, secondly, lenders need to stress-test affordability.
But adverse credit is growing and could rocket in the coming months and years.
More of your clients will need specialist advice – preferably before interest rates rise.
Nigel Payne is managing director of TFC Homeloans