The Intermediary – April 2025 - Flipbook - Page 6
RESIDENTIAL
Opinion
Energy bill hike
highlights need for
near-prime options
M
any households
will have winced
at the news that
the Energy Price
Cap is being
increased once
again from April.
Millions of us are on energy tariffs
that are covered by the cap and will
likely see our monthly outgoings on
gas and electricity increase in the
months ahead as a result.
However, higher energy bills are
not just a concern in the present; the
growth seen over recent years has been
a driver in payment issues for plenty
of households, contributing to the
growing need for lenders to improve
how they cater for near-prime
borrowers.
Feeling the strain
One of the clearest pressures on
budgets in recent years has been
energy bills. In the aermath of the
pandemic, we saw energy prices
pushed to levels we simply had not
seen before in the UK.
Ofgem, the energy regulator, sets
the Energy Price Cap, a limit on the
amount suppliers can charge their
customers for typical use, based on
wholesale prices. That cap was on
course to be set above £3,000 a year,
prompting the intervention of the
Government at the time, through the
lower Energy Price Guarantee.
While prices have dropped since
then, they remain higher than was
the norm in the preceding years. And
with the Price Cap due to rise once
more in April to £1,849 for typical use
– a hike of 6.4% from its current level
– plenty of homeowners will once
again feel the strain.
Ofgem publishes data on energy
arrears, and it’s a stark insight into
just how much of an impact these
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The Intermediary | April 2025
rising prices have had. According to
its latest figures, the average level of
arrears for those in debt but without
a repayment plan in place hit £1,568
for electricity and £1,324 for gas. To
put that into context, that’s up by
about a third on the same point in the
year before.
Meanwhile, Citizens Advice
reported that it helped around 60,000
people with energy bills last year, up
by 20% from the year before.
Mortgage borrowers
For some, energy bill debts will be a
long-term concern. But for others,
they will be the result of a temporary
issue, a short-term payment problem
which threatens to have a dramatic
impact on their borrowing ability for
longer than is really necessary.
That laer group of borrowers
may be an outstanding prospect for
mortgage finance, yet find themselves
excluded by mainstream lenders
and pushed towards the specialists
who can cater only for those with
adverse credit.
When we redesigned our Near
Prime proposition last year, it was
driven by the desire to support more of
these borrowers on the path towards
regaining prime status.
Broadening our criteria meant we
would be able to consider more cases,
and address a clear need that brokers
were seeing for a mainstream lender
to help these borrowers.
Clearly, utility bills are a significant
factor for plenty of borrowers with
less than perfect credit records, which
is why we doubled the unsatisfied
defaults cap from £250 to £500.
Importantly, that figure applies
to the current level of debt, not the
original level, which means we are
beer placed to work with those who
have made progress in clearing what
DAVID CASTLING
is head of intermediaries
at Atom bank
they owe, even if it was initially a
substantial sum.
Given the incredible increases to
house prices that we continue to see,
high loan-to-value (LTV) lending has
never been more important. That goes
for near-prime borrowers as much
as those with spotless records, which
is why we have now increased the
maximum LTV on our Near Prime
range to 90%.
Payment issues can happen to any
of us. But they should not have an
oversized impact on someone’s ability
to secure a mortgage.
Brokers need an answer
Energy bills are far from the only
outgoing that has put budgets under
strain over the last few years. We
know that brokers are seeing greater
numbers of clients who have a lessthan-spotless credit record, and it’s a
situation that seems likely to continue.
We received record levels of Near
Prime applications in February, the
second time that new highs have
been set within the last six months
alone. That isn’t just a reflection of
our pricing and criteria – though they
obviously are a huge contributor –
but also the growing need for more
flexibility from lenders.
That’s why it’s crucial for brokers
to identify the lenders that are
serious about providing finance for
Near Prime borrowers in the here
and now, but which can also support
them as and when they improve their
credit status. ●
