Mortgage options shrink for “unconventional” borrowers

The latest survey from Mintel, the consumer research group, states that 5.5 million (or one-third) of UK mortgage borrowers are facing severe financial difficulties because of increased costs.

The Mintel survey found that nearly 1.5 million borrowers have fallen behind with their monthly mortgage repayments and could therefore be categorised as sub-prime by future lenders.

Others in what the report describes as the “unconventional” borrower category (those regarded as posing a higher risk to lenders) include the self-employed or recently divorced.

UK mortgage banks have been tightening their lending criteria since the advent of the US sub-prime mortgage crisis and according to Mintel, the number of UK adults classified as “non-standard” by mortgage lenders could rise from its current level of 18 million, to 20 million.

Mintel’s senior finance analyst, Toby Clark, says that: “Sub-prime borrowers are only the tip of the iceberg. With lenders becoming increasingly cautious, many more mortgage-holders will be offered less than favourable terms when they come to remortgage.”

Mr Clark believes that “Demand for non-standard mortgages will continue to grow as people’s financial circumstances become more complicated, due to rising divorce rates and the growing popularity of self-employment.”

At the same time he expects non-standard mortgages to become harder to obtain.

Mintel is predicting that anyone without a regular income, or who has moved house frequently, or fallen behind with household bills, will be at risk of being categorised “non-standard” and therefore not eligible for the more attractive mortgage products.

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