Options For High-Risk Borrowers Shrinking?
People with bad credit history who are looking for a mortgage will find it more difficult now as several specialist lenders are pulling high-risk deals from their portfolios.
High-profile high-risk lenders include Kensington Mortgages and Amber, which is owned by Skipton Building Society. They have both removed their higher-risk products like second charge mortgages in the last week. They did this after Victoria Mortgages went into administration and Lehman Brothers decided to close two of its brands last week: London Mortgage Company and Southern Pacific Personal Loans.
It has been estimated that up to 75,000 people who have poor credit records will now find it almost impossible to get a mortgage as the credit crisis continues to pile up victims.
There were a number of urgent emails dispatched to brokers and intermediaries warning of immediate rate rises on all new mortgage offers by lenders that provide services for people with adverse credit or whose income doesn’t conform to norms by the likes of Standard Life, Commercial First, GMAC and Merrill Lynch’s Mortgage PLC. One such email said: “Please be advised that due to the continuing volatility in global capital markets, we will shortly be increasing many of our fixed, discount and revert rates.”
Mortgage expert Ray Boulger of John Charcol expected more sub-prime products to be removed, and other mainstream lenders to increase their rates, as Halifax and Abbey have already done. He said: “I estimate that 75,000 new mortgage applicants, those with heavily adverse credit, will fail in their applications. The products that are disappearing are those that made it easier for people with poor credit histories to get a mortgage.”
Panic has stricken a number of providers are Victoria Mortgages went under and Northern Rock went to the Bank of England to be bailed out. Meanwhile the three-month Libor, the rate Banks lend money to each other, has gone up from 6% to 6.8%, higher than the base rate by more than 1%. The Libor rate is used by many specialist lenders to set their rates for non-conforming or sub-prime sector borrowers, so those rates will be on the move upwards. Banks have lost confidence in one another, and many seem not to know the extent to which they have may have lost money in the sub-prime mortgage mess than started in the US some months ago. Until they can get to grips with the size of their problem they are likely to keep rates high.
Boulger felt that the credit crunch would continue to squeeze the mortgage market until well into 2008. He felt that there could be a number of other problems that come to light as things get worse and banks investigate further.
Spokesman for Kensington Mortgages, Ian Giles, said: “We pulled out of the second charge market because our institutional investors will no longer finance them. When Lehman Brothers pulled its two companies that offer second charges we were the only ones left offering them and couldn’t afford ti service the entire second charge market.”
If you're worried about your credit history and obtaining either a loan or mortgage, apply how at the MoneyOutlet and we are sure to help. Our lender network allows you to compare 1000s of loan and mortgage products to suit any credit history. Apply today for your free quote.
Published on September 24, 2007
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