The Condition Of UK Finances And Mortgage Options Accessible To Those With A Poor Credit Background
The national money advice charity, Credit Action have just announced it's monthly indebtedness statistics and this makes alarming reading for the shape of financial health in the UK. At the end of June 2011, public indebtedness totalled £1.451bn of which £1.241bn is held in mortgages and secured loans but this means that the average unsecured financing amounts to £8,064 per home. However, the Office for Budget Responsibility forecasts that household indebtedness will be a gigantic £2.126bn by the close of 2015.
In the year ending Mar 2011, the Citizens Advice Bureau in England & Wales dealt with 9,072 new indebtedness related problems every working day, 1,577 new county court judgments (CCJs) were granted every day within the first quarter of 2011 and 331 will be declared bankrupt every day. Possibly even more worryingly showing the debt spiral getting out of control, research undertaken by the homelessness charity, Shelter in August 2010 found that more than 2 million people had used a credit card to pay either the mortgage or rent.
Fortunately in the past many people who had over-committed themselves with unsecured commitments had benefited from increasing house prices and were able to use this as a get out of jail free card with borrowing consolidation being provided by banks and building societies falling over themselves to lend to these borrowers. Mortgage providers were using considerable income multiple stretches above the norm and would even consider borrowers with a subprime credit report. There were even lenders of last resort that would lend to repay mortgage arrears and even to stave off repossession. This no holds barred finance may have been a step too far but to stave off the debt crisis waiting to happen when base rate starts to increase again, the poor credit mortgage providers need to step up to the plate and offer the increasing numbers that are unmortgageable on the high street a safe haven.
It has never been more difficult for a first time buyer to get on the housing ladder and many do not understand that their monthly credit behavior on financial commitments, banks account and even mobile phones is being viewed by lenders to check out whether they gain a high enough credit score to obtain a mortgage. As is usual first time buyers do not have large deposits and unfortunately mortgages that require 10% deposit have the credit score bar set exceptionally high. Mortgage providers have past payment evidence on their arrears book and they use this data to set a score card to deter this type of borrower in the future. As a rule, they will dismiss applicants that have missed or even late payments on unsecured commitments. Some high street lenders are more lenient but they will usually approve in exchange for a higher deposit.
If 2 or 3 payments have been missed on a credit contract the loan company will typically issue a 'Default' notice which means that the borrower has broken the contractual terms of the credit agreement and this has a hugely detrimental effect on their credit appraisal and ability to get a mortgage from a high street moneylender. A default will be left on their credit report for 6 years from initial registration or satisfaction and in the current climate this make it almost impossible to get a mortgage except from a specialist bad credit mortgage moneylender.
If a debtor fails to pay a debt as it becomes due then an avenue open to the lender is taking the debtor to court to obtain a county court judgment for non payment of the debt and when this is issued by the court it is registered on the Register of Judgments and this is also held by credit reference agencies and will also remain on their credit report for a period of 6 years. Any CCJ's whether they are repaid or not will usually cause a high street lender to deny a mortgage application.
Even if would be borrowers are likely to be refused by high street mortgage providers if they have any late / missed payments, defaults or CCJs, the specialist bad credit mortgage providers are starting to lend again but with very specific lending criteria. In the current climate it seems that these providers are willing to ignore historic adverse information for first time buyers on the understanding that nothing has been recorded during the last 2 years. As this is an extremely niche area and criteria varies from lender to lender we would advise talking to a specialist bad credit mortgage intermediary such as mosaicmortgages.co.uk who will be able to provide independent recommendation as to the best mortgage for your particular circumstances.
In the year ending Mar 2011, the Citizens Advice Bureau in England & Wales dealt with 9,072 new indebtedness related problems every working day, 1,577 new county court judgments (CCJs) were granted every day within the first quarter of 2011 and 331 will be declared bankrupt every day. Possibly even more worryingly showing the debt spiral getting out of control, research undertaken by the homelessness charity, Shelter in August 2010 found that more than 2 million people had used a credit card to pay either the mortgage or rent.
Fortunately in the past many people who had over-committed themselves with unsecured commitments had benefited from increasing house prices and were able to use this as a get out of jail free card with borrowing consolidation being provided by banks and building societies falling over themselves to lend to these borrowers. Mortgage providers were using considerable income multiple stretches above the norm and would even consider borrowers with a subprime credit report. There were even lenders of last resort that would lend to repay mortgage arrears and even to stave off repossession. This no holds barred finance may have been a step too far but to stave off the debt crisis waiting to happen when base rate starts to increase again, the poor credit mortgage providers need to step up to the plate and offer the increasing numbers that are unmortgageable on the high street a safe haven.
It has never been more difficult for a first time buyer to get on the housing ladder and many do not understand that their monthly credit behavior on financial commitments, banks account and even mobile phones is being viewed by lenders to check out whether they gain a high enough credit score to obtain a mortgage. As is usual first time buyers do not have large deposits and unfortunately mortgages that require 10% deposit have the credit score bar set exceptionally high. Mortgage providers have past payment evidence on their arrears book and they use this data to set a score card to deter this type of borrower in the future. As a rule, they will dismiss applicants that have missed or even late payments on unsecured commitments. Some high street lenders are more lenient but they will usually approve in exchange for a higher deposit.
If 2 or 3 payments have been missed on a credit contract the loan company will typically issue a 'Default' notice which means that the borrower has broken the contractual terms of the credit agreement and this has a hugely detrimental effect on their credit appraisal and ability to get a mortgage from a high street moneylender. A default will be left on their credit report for 6 years from initial registration or satisfaction and in the current climate this make it almost impossible to get a mortgage except from a specialist bad credit mortgage moneylender.
If a debtor fails to pay a debt as it becomes due then an avenue open to the lender is taking the debtor to court to obtain a county court judgment for non payment of the debt and when this is issued by the court it is registered on the Register of Judgments and this is also held by credit reference agencies and will also remain on their credit report for a period of 6 years. Any CCJ's whether they are repaid or not will usually cause a high street lender to deny a mortgage application.
Even if would be borrowers are likely to be refused by high street mortgage providers if they have any late / missed payments, defaults or CCJs, the specialist bad credit mortgage providers are starting to lend again but with very specific lending criteria. In the current climate it seems that these providers are willing to ignore historic adverse information for first time buyers on the understanding that nothing has been recorded during the last 2 years. As this is an extremely niche area and criteria varies from lender to lender we would advise talking to a specialist bad credit mortgage intermediary such as mosaicmortgages.co.uk who will be able to provide independent recommendation as to the best mortgage for your particular circumstances.
