According to the latest research from The Mortgage Lender, some 3.2 million adults in the UK have missed some form of major payment in the past two years as the pandemic has hit household finances hard.
This equates to 6% of people who have missed their usual payments, including major expenses such as their rent, mortgage or credit cards.
The study, which looked at adverse credit, also found that four in 100 UK adults admit to missing multiple payments, representing a significant proportion of the population who have felt the financial crisis throughout the pandemic. .
It is therefore not surprising that young adults are more likely to have experienced financial difficulties throughout the pandemic as the age group most affected by job instability.
More than a tenth (11%) of 18-34 year olds have missed at least one usual payment in the past two years, nearly four times as many as those over 55 (3%). About 6% of young adults admit to missing multiple payments.
Missed payments can have big implications for a person’s access to credit in the future, including large loans like a mortgage. It is therefore concerning that potential homebuyers are more likely to have accumulated bad credit recently, with one-tenth (10%) admitting to having missed one or more payments in the past two years, putting them at risk of seeing their mortgage application rejected.
Of all the adults who admitted to missing a payment, the average number of missed payments was three, with almost a third (31%) missing five or more.
Looking at which bills had been missed, the majority had missed a credit card payment, at 45% of all missed payments. People identified other payments they missed as follows:
40% have missed paying a utility bill
27% have not paid their housing tax
25% missed their rent payments
23% missed personal loan repayments
7% of missed mortgage payments
For those who missed a payment and are now looking to remortgage, they could face additional difficulties, with the potential to switch to the standard variable rate (SVR), particularly a concern as interest rates start to fall again. to augment.
Peter Beaumont, Managing Director of The Mortgage Lender, comments: “It has been almost two years since the onset of Covid-19 and the true picture of the financial difficulties some people are facing is coming into focus.
“With greater clarity on household credit histories over this period, we are now also seeing the potential dangers to people’s financial futures. The past two years have impacted the jobs and wages of many people, putting a strain on household finances, and now, with the rising cost of living due to high inflation and the cost of energy, the pressure on the nation’s finances is even greater.
Beaumont says all of this can cause a person to miss a regular payment, which could then have a ripple effect on their access to credit down the line.
“In such an unstable economic climate, it’s important to prevent more people from falling into financial hardship,” he adds. “The loan market needs to be better equipped to deal with the greater number of people coming out of the pandemic with poor credit histories.”
“Rather than penalizing people for the consequences of an unprecedented event, the industry should work together to support those who have missed payments so that people, especially aspiring owners, are not shut out of the market.”