The Return of the Subprime Mortgage
In the wake of the 2007/2008 financial crisis, the market for subprime mortgages ceased to exist. Demand from consumers may have been relentless, but brokers and lenders alike wouldn’t go near those with imperfect credit.
Today, the whole thing has done a complete 180. To such an extent that even if you were declared bankrupt just one year ago, you could still qualify for a mortgage today. As competition grows among subprime mortgage lenders, interest rates and borrowing costs are also falling to new lows.
One of the more recent names to join the trend is Masthaven Bank, which as of the summer of 2018 opened its doors to subprime borrowers. Missing a few past mortgage payments here and there isn’t likely to count you out of the running – neither is the presence of (some) CCJs on your record.
A Victory for Common Sense
Customers have always argued that credit scores provide a fundamentally flawed overview of a person’s financial status and activities. You could have a terrible credit score, yet be sitting on a personal fortune of millions. Likewise, you could have made a few minor mistakes three years ago, only to have conducted your finances in an exemplary manner ever since.
When a blemish finds its way onto your credit report, it sticks around for a full 72 months. Irrespective of your financial status and activities thereafter, it’s with you for the long-term.
At long last, some of the UK’s more dynamic lenders and brokers are accepting the flaws in the credit rating system. Most are still afraid to use the term ‘subprime’ mortgage, but readily accept applications from those with ‘imperfect’ credit, or borrowers out to improve their credit score.
The largest and most established names still steering clear of the whole thing.
Not On the High Street
For the time being, the market for subprime mortgages remains a ‘not on the High Street’ market. You can’t simply walk into a branch of a major lender with poor credit and expect to be loaned a penny. Without a strong credit score, proof of income and so on, they’re unlikely to give you the time of day.
The overwhelming majority of subprime lenders operate in the specialist lending sector. Typically accessed through a specialist broker, products and services are tailored to meet the requirements of the borrower. Even with a heavily damaged credit score, your application will be fairly considered.
Greater damage typically equates to higher overall borrowing costs, but not nearly as elevated as you might expect.
With more consumers struggling to maintain perfect scores than ever before, subprime mortgages are becoming increasingly relevant. Working with a specialist broker means gaining access to an extensive ‘alternative’ loans market, which can be far more accessible than mainstream High Street lending.
Poor credit can still pose problems, but no longer has to rule you out of the running. It’s simply a case of knowing who to approach when looking to borrow funds for any purposes. If you’re in a stable financial position and can comfortably afford the loan, everything else is inconsequential.