Brokers warn that short-term 'convenience credit' is distorting affordability models, and say FCA regulation can't come soon enough
Buy Now, Pay Later might feel harmless to consumers, but brokers say the short-term credit habit is quietly eroding borrowing capacity, and exposing the cracks in lenders’ affordability models. With the FCA preparing to regulate BNPL from 2026, the question is whether oversight will bring consistency or more complexity.
A recent industry survey found that more than two-thirds of brokers have seen BNPL use hinder a client’s mortgage application, with some high-street lenders counting small, short-term repayments as long-term borrowing commitments.
Rhys Edwards, of Brooks Mortgages, said affordability is where the impact is most severe. Affordability, he said, “absolutely” takes the hit, while “risk appetite comes down to debt-to-income ratio and the client’s background profile.” According to Edwards, “some banks, like Klarna and PayPal Credit, can massively affect affordability because the lender’s system will annualize a short-term payment over a year. That can dramatically reduce affordability calculations.”
He added that underwriters will sometimes reconsider when given context, but the damage is often already done. “You can often go back to the underwriter and explain it’s only a three-month thing, but generally, I advise clients to stay away from those products if they’re thinking about buying a house,” he said.
Edwards added that confusion isn’t limited to BNPL. “Clients often ignore interest-free credit cards on fact finds because they’re not paying interest, but it’s still debt and it does affect the mortgage. If you’ve got £10,000 outstanding, that’s £300 a month, and it will be factored in.”
For Matthew Fleming-Duffy of Knight Frank Finance, the issue lies within lenders’ own systems rather than BNPL itself. He describes affordability as “such a mystic art,” pointing out that “banks use all their own affordability calculators” and “you’ll put fixed data into Mortgage Broker Tools and you get this variance of how much somebody can borrow, which could be hundreds of thousands of pounds different across different lenders.”
He said the inconsistency isn’t only between institutions. “I can feed that information in today, go back to it next Monday, just click refresh and get different figures,” he said. “Different banks go through different risk modelling, risk profiling, with things like the Buy Now, Pay Later deals and how that impacts their decisioning.”
With the FCA set to reclassify BNPL as “deferred payment credit” by July 2026, Fleming-Duffy believes open-banking technology could ultimately help correct the imbalance. “When you translate this to what underwriters look at, open banking could actually fix some of the conundrums,” he said. By using “specific data at a macro modelling level,” short-term debt “doesn’t have an impact on affordability because it’s only a couple of months.”
Still, he cautioned that human oversight can introduce fresh inconsistencies. “If a human looks at a bank statement, [they] sit there and go, ‘Oh, that’s an expense I’ve got to factor in.’ Open banking, I think, could start to open that up a bit so that you’re getting more accurate affordability decisioning.”
For now, brokers say BNPL remains a small but growing complication in an already opaque affordability landscape. The concern isn’t that clients are reckless, but that credit systems can’t yet tell the difference between a £40 Klarna order and a long-term loan.
Until regulation and technology catch up, brokers agree on one simple message: convenience credit today could cost your client their mortgage tomorrow.
