Since 2011, 9.2 million people across the UK have been unable to secure credit
One million of Britain’s richest have been denied a loan, despite their personal assets eclipsing the amount they actually need.
That’s according to new research by London bridging loans specialist Market Financial Solutions (MFS), which found that 1.32 million high net worth individuals have been rejected for any form of loan or credit.
Its Asset Rich, Credit Poor report reveals that, of the UK’s top 12% of earners, 818,000 have been refused a first, second or buy-to-let mortgage due to a poor credit rating in the past five years.
Since 2011, 9.2 million people across the nation have been unable to secure credit.
Britain’s millennials also say they’ve been let down by the current credit lending process, with a third of 18 to 34 year olds refused access to high-street credit.
And fifty-five per cent of UK consumers say they have insufficient knowledge of alternative finance options, with only 10% relying on alternative finance to execute their investment strategy
One million of Britain’s top-rate taxpayers have been turned away from a high-street lender, despite owning assets that exceed the total loan-amount required
When analysing the full sample of data – 4 million people nationwide stated they had been refused a loan of any kind despite owning assets greater than the loan amount
Almost a tenth (8%) of UK adults with over £250,000 worth of investments stated that they have been refused a first, second or buy-to-let mortgage due to a poor credit rating, while 13% sought an alternative finance route.
The research also found that Londoners fare the worst when it comes to credit approvals. Over a third of Londoners have been unable to secure a credit card, bank loan or overdraft in a timely manner in the past five years. When asked why, 42% of Londoners feel that the current process to acquire credit from banks is too restricted by red tape and bureaucracy.
Despite the struggles Londoners face in accessing traditional lines of credit, 59% of those surveyed said that they do not know enough about alternative finance to consider this as a funding option. Outside of London, the North-East voiced the strongest level of dissatisfaction when attempting to acquire credit from banks, with 44% of people in the region considering the process too restrictive. This is compared to a national average of 31%.
Looking to Britain’s millennial generation, MFS’s research reveals that just under a third (31%) of 18 to 34 year olds have struggled to acquire some form of credit from a bank. Moreover, their perception of the UK lending infrastructure is a negative one, with 40% feeling dissatisfied with the bureaucratic measures impeding their investment aspirations. At the end of August, Bank of England data indicated that mortgage approvals dropped to an 18-month low in July, with just 60,912 mortgages approved by banks and building societies, the lowest monthly rate since January 2015.
The launch of today’s report reiterates the disproportionate value British banks place on “tick-box” profiling, resulting in a large proportion of consumers failed, despite their asset-rich status. The research reflects a system that is inherently flawed, inadequately servicing not only the critical mass of UK homebuyers, but moreover, the UK’s wealthiest individuals. Bogged down by pre-requisites not relevant to the current profile of high-net-worth Britain, the MFS findings underscore a system not fit for purpose.
Despite the flaws underpinning Britain’s lending system, MFS research found that general consumer awareness of alternative finance was extremely low, with only 10% of all Brits relying on alternative finance as part of their investment strategy. With 55% of Britons stating that they do not feel informed about alternative finance options, MFS research has demonstrated the need to improve consumer knowledge to alternative lending sources and overcome the restrictive loan measures imposed by the banks.
Parash Raja, CEO of MFS, said: “Whether you’re a high-net-worth individual or a prospective property buyer, there is a clear problem for British consumers and investors attempting to access traditional lines of credit.
“Londoners are clearly struggling, and this is concerning when you consider that the price for London property is continuing to rise. The current processes adopted by the UK high street’s big-name lenders are clearly restricted in their effectiveness due to excessive red tape that is putting property purchases at risk, and inhibiting borrowers from fulfilling their intentions, both in business and in their personal lives.”