As we enter the final few weeks of the year, a number of lenders have entered into an apparent ‘interest rate war’ assisting First Time Buyers, Residential mortgages and the Buy to Let sectors. But this is also happening in the ‘Near Prime’ arena. I’m calling it ‘Near Prime’, but it has many other names including, Credit Repair, Almost Prime, Adverse and so on. In short, it’s an area of mortgages that cater for those who have had some sort of financial issue in the past.
This is a growing sector and many lenders will now cater for missed mortgage payments in the last 12 months, Defaults, County Court Judgements (CCJs), discharged bankrupts/IVAs and those who are in a debt management plan.
This area of the market took a battering back in 2007 as many lenders who offered these types of mortgages were shut down or mothballed. Today, the regulatory lending restrictions are more stringent than back then and the new breed (some never really left) have a whole new outlook on the term ‘responsible lending’. Where there is demand, there will always be supply.
Rates start from the late 1%s and go right up to the early 8%s, depending on individual circumstances. Some lenders will lend up to 90% of the property value in some instances and will cater for both employed and self employed.
Financial issues do adversely affect credit scores (the normal assessment process used by a lender to decide whether to lend or not), and as such, some Near Prime lenders will manually review on a credit search, rather than resort to a credit score.
Of course, a lender will only consider those who have endeavoured to right the financial issues of the past. They will not entertain those who continue to flout good financial management.
Finally, the Near Prime lender is a ‘stepping stone’. Most issues tend to disappear from a credit search after a few years. Therefore, the aim would normally be to cater for current requirements on a short to medium term basis with the longer term outlook being structured to enable the customer to get back onto high street mortgage offerings, as quickly and cost effectively as possible.