Borrowers with credit problems see mortgage rates fall
The number of credit-impaired residential mortgages has decreased by 261 to 590 products over the past six months, according to Moneyfacts.
However, the financial information provider found that, although choice is becoming more limited overall, the average credit-impaired two-year fixed rate mortgage has fallen by 0.13% to 4.36% since October last year, while the average three-year rate has fallen by 0.30% over the same period.
Despite this fall in interest rates, the average two-year fixed credit-impaired rate is still priced a significant premium to the average two-year fixed rate of 2.48% available to full status borrowers, said Moneyfacts.
Spokesperson Darren Cook said: “Credit-impaired mortgages are an essential option to those borrowers who have experienced minor financial issues and were previously excluded from negotiating a new mortgage deal due to a lack of product availability following the financial crisis.
“Even though credit-impaired mortgages are riskier than their full status resident mortgage counterparts, the current credit-impaired mortgage market is by no means the same type of lending environment that presented itself before the onset of the financial crisis. Back in August 2007, when lending principles and regulatory guidelines were much looser than they are today, there were 5,106 credit-impaired deals available – nearly 10 times as many as there are now – which accounted for a whopping 55% of the entire residential mortgage market.”
He continued: “The credit-impaired mortgage market is considered a specialist lending sector, so it is no surprise that, according to Moneyfacts research, 91% of the total number of credit-impaired mortgage products are only available through a mortgage broker. It is clear that any borrower seeking a credit-impaired mortgage would be wise to speak to a mortgage broker first, regardless of whether or not it is required.”