UK Housing Market Sees Return of Sub Prime Mortgage Lending
Lenders looking to increase business are now approving mortgages of the sub-prime type to those with shaky credit scores and bankruptcies. These loans are the same type of loans which many blamed on the cause of the financial crisis of 2007. Lenders are taking giant risks lending to these individuals who have little evidence of being able to manage a home mortgage.
Although lenders are taking chances and lending to candidates who could be considered anything but perfect, there are extra benefits. This lending is able to be offered with a certain caveat. That caveat is lending with higher interest rates attached. This extra cost is to cover the higher amount of risk which comes with lending to high risk applicants.
For many borrowers, a sub-prime mortgage loan is the only way to obtain funding for a residence. Even if the interest rate on the loan is much higher than normal, this at least enables them to step on the first rung of the property ladder.
Sub-prime mortgages disappeared in the wake of the 2008 economic crash, but are now returning. In the opinion of many close to the housing market, offering these types of loans could lead to potential issues, but likely not as severe as seen before the challenging economic times of 2007.
Remortgage activity continues to be at a high level. Many house owners are making the decision to take advantage of the benefits of a remortgage before the Bank of England raises the base rate causing an immediate increase in interest rates country-wide.