Rise in Number of UK Credit Impaired Mortgage Deals

By: MoneyFacts

The number of residential mortgages available has been increasing steadily over the past year as lenders look to diversify their range of products to attract different types of customers. As a result, the latest figures from Moneyfacts.co.uk show that the number of credit-impaired mortgage deals on the market has risen by 118 in the last six months.

Charlotte Nelson, Finance Expert at Moneyfacts.co.uk, said:

“Credit repair mortgages represent a small proportion of the mortgage market – just 17%. However, in the past six months, the number of deals has increased by 118 to stand at 843 in August. This is good news for borrowers who have struggled with a poor credit history in the past and had difficulty in obtaining a mortgage.

“With fierce competition in the mainstream market, providers have opted to branch out into more niche areas, including adverse credit mortgages. This extra attention has resulted in an increase in the number of deals available to this type of borrower.

“Despite this boost in the number of deals however, the two-year fixed rate for those with a poor credit history has risen a whopping 0.17% in the past six months to stand at 4.52%. Not only have rates risen dramatically but, as to be expected, the prices offered by these deals are far higher than standard options on the market.

“For example, the average two-year fixed rate mortgage stands at 2.54%, a massive 1.98% lower than the credit-impaired average. While the difference may appear stark, the higher prices do reflect the extra risk that is involved to the provider.

“Although credit-impaired mortgages are slightly riskier, it is by no means a return to the lending style of before the financial crisis. Back in August 2007, there were 5,106 credit-impaired deals, which accounted for a whopping 55% of the residential mortgage market. At the time lending principles were significantly looser than today. Lenders are now required to delve a lot deeper into a borrower’s financial history to ensure they are able to afford the deal.

“It would be wise for any borrower who is unsure about their credit history to check their file online, amending any errors. If they feel their score is low, trying to improve this will boost a borrower’s chances of acceptance.

“These deals offer borrowers who have experienced minor issues in the past a lifeline to get back on track once more. However, any borrower considering this as an option should first seek advice from a financial adviser to ensure it is the right choice for them.”

moneyfacts.co.uk is a financial product price comparison site, launched in 2000, which helps consumers compare thousands of financial products, including credit cards, savings, mortgages and many more. Unlike other comparison sites, there is no commercial influence on the way moneyfacts.co.uk ranks products, showing consumers a true picture of the best products based on the criteria they select. The site also provides informative guides and covers the latest consumer finance news, as well as offering a weekly newsletter.

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