People with a poor credit rating are often ineligible for standard mortgages or remortgages from high street banks as lenders regard people with previous credit problems such as CCJs, bankruptcy and defaults as a high risk. Before the credit crunch in 2008, there was a burgeoning market of specialist lenders providing mortgages for people with low credit scores.
In contrast, recent times have seen a stark reduction in the availability of what are known as sub prime mortgages, with thousands of specialist products removed from the market altogether. Before the credit crunch, sub prime lending was the fastest-growing segment of the UK mortgage market, accounting for about 10% of the £300 billion sector in 2005. The rapid growth in the sector led to fierce competition and a price war erupted where lenders were keen to get the business of people with adverse credit history. As a result, the interest rate differential between non standard sub prime and mainstream mortgages narrowed. Today the situation is very different as lenders are incredibly choosy about who they want as borrowers, if you have anything other than an exemplary track record of borrowing, you will find your options confined to a small selection of lenders.
Can I get a mortgage?
Despite the limited choice, you might be able to obtain a mortgage by going through an independent mortgage broker rather than direct to a provider as they have access to the entire market and can advise you on the products most suitable for people in your situation. The key aspect is the amount of deposit or equity you have at your disposable as the greater this is the more likely you will be welcomed with open arms.
There are a select number of specialist lenders still operating whose decision making is not soley dependent on automated credit scoring. Instead they use a mixture of sensible underwriting rules and criteria applied by experienced people who look at the applicants individual situation and creditworthiness which means they might be able to say 'yes' to an person who has been turned down elsewhere.
There are different levels
of mortgages available to people with a poor credit rating. Someone who has missed a couple of mortgage or loan payments in the past will often be
regarded as "near-prime" or "light adverse" and will pay a
slightly higher rate of interest when compared with standard rates. Someone who has a very bad credit rating
as a consequence of being a discharged bankrupt or having a lot of county court judgements against them
will be charged a much higher rate of interest because the borrower will
considered a more risky bet.
If you have a CCJ or have missed a payment occassionally do not automatically assume you cannot get a mainstream mortgage, as some lenders will accept some small "minor debt".
Once you have been with your lender for two to three years and have a solid track record of keeping up with repayments, you should be able to switch into the mainstream market, where interest rates are lower.
Use the search facility above to find expert brokers who can assist with mortgage applications from people with bad credit history.