More than a million of Britain’s wealthiest individuals have been turned down for credit over the past five years, new research by London based bridging lender Market Financial Solutions (MFS) has revealed.
According to MFS, 17% of high net worth individuals (HNWIs) have been refused credit since 2011, equating to 1.3 million people across the nation. Furthermore, the nationally representative survey of 2,000 UK adults found that almost a tenth (8%) of UK adults with over £250,000 worth of investments have been refused a first, second or buy to let mortgage due to a poor credit rating.
The research also uncovered that 15% of HNWIs have been unsuccessful in an application for credit despite owning assets that actually exceed the size of the loan they requested. The result is mass dissatisfaction with the current lending system; 31% of all respondents said they thought the current credit lending process is too restricted by red tape and bureaucracy. Londoners are particularly aggrieved, with 42% of people in the capital stating they are frustrated with the credit system.
With even the wealthiest echelons of society struggling to access credit, large numbers of people are turning to alternative routes to finance. MFS’s study found that 13% of HNWIs have been refused credit from a high street bank but were later able to secure finance through an intermediary, independent financial adviser, broker or specialist finance provider, while 25% said they have used alternative finance and found it easier and quicker than going to mainstream or traditional lenders.
However, a lack of education and awareness is holding people back from pursuing alternative finance options and 55% of Britons said that they do not feel informed about alternative finance options to make use of them.
Parash Raja, chief executive officer of Market Financial Solutions, commented on the research: ‘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.
‘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.’