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Wednesday 27th of May 2009
June 3, 2007

Bad credit mortgages going mainstream


by Brian Turner
Bank of England data: Mortgage approvals down in April

More high street lendors are tailoring their mortgage products towards individuals, according to the Abbey. And research from L&C suggests that those with a bad credit history can still access mainstream mortgage products.

Competition in the mortgage market is cited as a main reason for increased attention to consumers who may otherwise have little access to high street mortgage products. The result is that rather than offering generic products, there’s increasing focus on mortgages as covering a range of niche markets.

One of the biggest is the so-called sub-prime sector - something that might normally be referred to as the bad credit mortgage market - which has become increasingly mainstream in terms of consumer accessibility to mortgage products on the high street, even if they have had credit problems in the past.

HBOS estimates that the UK sub-prime mortgage market alone will be worth over £30 billion by the end of the year, totalling 8% of the mortgage market.

However, while lendors may be trying to increase accessibility to mortgage products in order to increase their own profits, the concern is that the drive to cover the sub-prime market could destabilise some lenders.

Already the sub-prime mortgage market in the USA has seen finance companies write off significant losses, and the danger is that too much focus on sub-prime lending in the UK looks to short term gain rather than longer term financial stability.

This is especially as the number of CCJ’s and bankruptcies have seen alarming increases over the past two years, suggesting dangerous levels of debt which already surpasses £1 trillion.

The Financial Services Authority has already warned of the risks posed by the sub-prime mortgage market, but lenders assert these are minimal, namely because fewer discounts are being offered than was traditionally the case.

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