Sub-Prime Mortgages are on their way back, Clear Property Investment learned this week.

The deals aren't referred to as sub-prime but as mortgages for people who are having a few credit issues.

Basically this means people who in the past would have no trouble gaining a mortgage but because of tighter lending restrictions by banks and building societies these days are being turned away repeatedly.

A typical candidate for one of the newer mortgages may have missed one credit card payment, had a mortgage arrear or even, in England, a couple of county court judgements not totalling more than £750.

The mortgages are only available through brokers or financial advisers and are at least one per cent higher than current best rate buys.

"We now have permission to lend money to all home-owners. We're the first non-bank institution to achieve this for some time," said Alan Cleary of Precise, speaking in the Guardian newspaper.

"We have identified lots of borrowers who have a good credit profile but who are unable to obtain mortgages. They are people who would have been prime a few years ago but who are now refused a loan. Previously, when there was a lot of money kicking around, lenders categorised borrowers into bands A, B and C. A was the best credit score, and C was the cut-off point which they didn't go below.

"Now the banks will only lend to A-band customers. That means there might be a person who is not in the 'adverse credit' category but who can't get into the A category either. It may be as simple as a lack of activity or track record in borrowing.

"Our customers will be very minor adverse credit. It could be as trivial as having missed one credit card payment six to nine months ago. That alone would stop a lot of people from qualifying for a mortgage at the moment."

Sub-prime mortgages were blamed for the collapse of the US housing market which led to the recent credit crunch and banking collapse. In the UK hundreds of mortgage companies grew rapidly from the early noughties catering for people who had earlier problems such as having their homes repossessed. Several large banks also established seperate sub-prime mortgage operations. By 2009 these were all closed down.

The Financial Services Authority are today insisting lenders are more scrupulous when it comes to borrower checking and ability to repay.

For further mortgage and investment advice contact our Clear Property Investment team.

 

 

 

 

 

 

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