CML publishes information on adverse credit mortgages
A new article published by the Council of Mortgage Lenders (CML) reveals that over 5% of total mortgage lending in 2005 was probably “adverse credit” lending to people with previous credit problems, making it the largest specialist sector after buy-to-let.
The CML’s other findings on this growing sector of the market include the following:
• Nearly 50% of adverse credit lending is to people in the less serious “low adverse” category, and less than a quarter is “high adverse”.
• 80% of adverse credit mortgages are sold through intermediaries, compared to less than 60% of non-adverse.
• Approximately 66% of adverse credit mortgages are remortgages - compared to about half of non-adverse loans.
The CML’s research also revealed that for many borrowers adverse credit lending represents a way of rehabilitating their finances after a period of financial difficulty.
Independent research supports the CML findings: 30% of non-conforming borrowers thought their credit standing had improved since taking out their mortgage, compared with 8% who felt it had got worse, suggesting that a material degree of credit rehabilitation does occur.
CML head of research Bob Pannell, comments:
“We believe that the adverse credit mortgage market, although higher risk, plays a valuable part in helping many individuals who encounter short-term financial difficulties to rehabilitate their finances and migrate back to prime products.
“There are many flavours of adverse credit mortgages to deal with the broad range of circumstances that people face. It is a real testament to the dynamic and innovative nature of our market that UK lenders are able to offer an attractive range of mortgages to suit these different circumstances.”