Changes in the Subprime Market

Right - our first post!

And what else can we talk about except one of the most dramatic financial events of the past year - the US subprime crisis, which as a result has had a noticeable effect on the UK mortgage market.

For a bit of background on the recent US crisis, we recommend visiting the BBC’s website:

 Beginners Guide to the US Credit Crisis

As a result of the US’ subprime crisis (and the subsequent effect it has had on the UK’s mortgage market), many mortgage lenders have restricted the number of subprime products on offer to borrowers with impaired credit. Lenders have also imposed stricter criteria for borrowers when they apply for a mortgage - long gone are the days when a borrower could get a 100% mortgage with impaired credit!

There have also been changes in the way in property valuations are being carried out when applying for a mortgage. A valuation is the estimated value of a property, which is undertaken when an application is made for credit to be secured against a property (such as a mortgage or remortgage). Homeowners are now finding their properties being downvalued, resulting in them being unable to borrow as much against their home.

So, how will this affect the average homeowner? Well, if you suffer from severe adverse credit, you may find it increasingly difficult find a new deal, as lenders will simply refuse to lend to you - classing you as ‘too risky’. Borrowers with light adverse credit may also notice the affect - whilst in the past those with blemishes on their credit record wouldn’t have required a specialist mortgage product, with the stricter criteria these borrowers will no longer be eligible for prime mortgage products.

However, it’s not all doom and gloom - there still are sub-prime deals available, and some at competitive interest rates.