The Intermediary – July 2025 - Flipbook - Page 55
S E C O N D C H A RG E
Opinion
The debt spectrum:
More cases deserve
a second look
I
n a sector that oen
highlights its inclusive and
flexible approach, support
for borrowers with past or
ongoing debt arrangements
still appears patchy at best. An
Individual Voluntary Arrangement
(IVA) or Debt Management Plan
(DMP) on a credit file can prompt a
hasty ‘no’ from many lenders.
The scale and complexity of
personal debt in the UK has changed
dramatically. A growing number
of borrowers are entering into
formal arrangements, not because
they are irresponsible with their
finances, but because they must take
action, and this seems like the most
appropriate option.
For brokers, that has created a
unique challenge – one that’s less
about inflexible rules and more about
what debt solution suits.
A growing proportion
Government data shows that IVAs
continue to make up more than
half of all personal insolvency cases
in England and Wales. More than
67,000 were registered last year alone.
Meanwhile, the use of Debt Relief
Orders (DROs) has climbed sharply
following regulatory changes, with
DROs now accounting for around 37%
of insolvencies.
The number of people in the UK
living with some kind of formal debt
arrangement is increasing. In the
12 months to 30th April 2025, one
in 417 adults in England and Wales
entered insolvency. That includes
individuals who have since completed
an IVA, DMP or bankruptcy and are
now back in regular employment,
managing their finances as best they
can, and trying to secure a mortgage
or remortgage. In other words, people
trying to move forward.
One of the difficulties brokers face is
working out which debt solution cases
can actually be placed. There’s oen
very lile guidance, and credit reports
usually don’t tell the full story.
Take IVAs, for example.
Government figures show most are
completed successfully. That should
prompt a different type of question:
not ‘Has this person ever had an IVA?’
but ‘How long have they been in it, and
how have they managed it?’
A DMP with over a year of regular
payments might say more about a
borrower’s behaviour than a standard
score ever could. Equally, a DRO
that was discharged more than two
years ago may not carry the same
implications as one that’s still in place.
But these nuances can get overlooked.
At Norton Home Loans, we apply
a structured but flexible framework
when reviewing cases involving
IVAs, DMPs, or past insolvency. We
can consider borrowers with an IVA
in place if it has been running for at
least 54 months and is due to be seled
from mortgage proceeds, provided the
Supervisor confirms they will release
their interest in the property.
We also regularly support applicants
who have completed their IVA and
are now seeking a fresh start. For
DMPs, we typically look for at least 12
months of satisfactory payments, with
full details of the plan disclosed, but
again, we can also look at cases where
the plan has been fully seled. DROs
must have been discharged for at least
two years, and bankruptcies for three.
Alongside this, we apply a unit-based
system to adverse credit, focusing not
only on what has happened, but how
the borrower has responded.
As formal debt solutions become
more common, lenders will need to
keep tailoring their approach. That
doesn’t mean compromising on
DAVID BINNEY
is head of sales
at Norton Home Loans
risk, but recognising the difference
between someone in difficulty, and
someone who has taken positive steps
to address it.
Too oen, decisions are dictated
by how something looks on paper.
When it comes to adverse credit, it’s
not always that helpful. A satisfied
County Court Judgement (CCJ) or
a default from two years ago might
still be flagged, even if the borrower
is now in a completely different
financial position.
Are the payments regular? Has the
borrower stayed engaged with their
arrangement? These are the questions
brokers are already asking, and that
lenders need to take more seriously.
Balanced decisions
There’s a need for greater clarity, not
just on what is or isn’t acceptable,
but on what kind of conduct actually
maers. The right supporting
information can make all the
difference. But so can the confidence
to challenge assumptions.
Most brokers working in the
specialist space know that no two
adverse credit cases are the same. But
unless criteria reflects that, borrowers
will continue to be le behind.
As the lines between prime and
non-prime continue to blur, thought
needs to be given to how we assess
creditworthiness.The job is to move
beyond headline numbers and think
about borrower behaviour. Recovery
won’t always be visible in a credit file.
But with the right approach, it can
be supported. The opportunity lies
in recognising progress and being
prepared to act on it. ●
July 2025 | The Intermediary
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