Arrears, adverse credit, and debt – now is the time to face facts and adapt

I can understand where everyone is coming from, but the die has already been cast. The precedent has been set.

As the Renters’ Rights Bill gets its second reading, it’s still generating a lot of push back in the market. Specifically, The National Residential Landlords Association (NRLA) is the latest among many organisations to voice concerns over new proposals in the bill.

Calling for the government to do more to prevent tenants from accruing debts, the NRLA has called out plans to increase the amount of arrears a tenant can build up from two to three months before a landlord can serve a notice to repossess a property.

Allowing renters to build up more arrears, it argues, will place both them and landlords at risk. I can understand this. I can also understand why the state is aiming to take such drastic rental action in the first place. I’m not here to say what will work, and what won’t.? ???

But what’s clear to me is that fighting against arrears right now is relatively pointless. Letting your debt get away from you is never good and over the long term, we all need to get everything under control. In the immediate term though, or at least until our economy embraces something approaching normality, we should instead adapt to the reality facing us.

Already, one in 10 private tenants are struggling to pay their rent. Hundreds of millions of pounds are owed in rental debts to councils, and arrears are on the rise according to an Independent exclusive. Moreover, as Generation Z get on the housing ladder, they’re set to pay ￡104,400 on average in the first five years of their mortgage. More debt repayments than any other generation that came before them.

Looking more broadly, total UK personal debt hit ￡1860.6 billion at the end of July 2024, according to the Money Charity, up by ￡25.76 million in a year. Also, Pepper Money’s 2024 Specialist Lending Study found that 46% of those who have missed a credit payment went on to miss more down the line.

All this has an impact. Some 8.38 million people have experienced adverse credit in the last 3 years. The highest level seen since the report was launched. Untangling all this will likely take years. Decades even.

With patience, I’m sure we’ll get there. In the meantime, though, what we as lenders and providers can do is provide suitable, realistic options for those struggling with these issues.

Chances are, borrowers with missed payments, high levels of debt, and and/or arrears will be shunned from the lending market. This is a travesty – one of the only ways we’ll grow out of all this pessimism is through investment and growth.

Thankfully, our role as a bespoke property lender should become increasingly crucial. We say it all the time, but it’s worth repeating: we’re happy to hear from homeowners or buyers who may have less-than-ideal financial histories. Property investors with bankruptcies, CCJs, and missed payments to their name do not need to see their plans derailed.

Specialist finance is proving more than useful. It’s becoming necessary.?