Many people are aware that one of the effects of the banking crisis a few years ago was the demise of “Sub Prime” lending.
In short, this was a specialist area of mortgage lending to clients with a less than perfect credit history, whether that was CCJ’s, mortgage arrears, Defaults, IVA’s or bankruptcy.
This left a large gap in the market, especially considering a lot of the credit problems were historic and so not representative of the clients current financial position.
Consider this – a married couple, Mr has a steady job working for a local printing firm earning £20,000 a year. His wife has a great job working at a senior management position for a High Street bank, earning £50,000 a year. Their lives, as you may be able to imagine, are very comfortable.
Until Mrs finds out she is to be made redundant.
Their mortgage payment is £1,400, not to mention the 3 credit cards and 2 personal loans they have. Until now, all has been easily affordable. Her redundancy pay is sufficient to clear a loan and a credit card, but that still leaves the mortgage a loan and 2 credit cards.
Mr’s salary only covers the mortgage, and now Mrs is on Jobseekers Allowance of £70 a week. Clearly they are going to struggle to makes ends meet, so they do the right thing and contact their creditors to discuss their options. All creditors agree to accept reduced or token payments, but the arrears still build up and eventually the Default Notices start to arrive. One of the credit cards goes straight to solicitors to start legal action, and takes the debt to the County Court. A CCJ is granted.
Fortunately, Mrs gets a new job after 6 months, albeit on half the salary she was earning previously.
The Defaults & CCJ will stay on their credit file for the next 6 years. That means that even after 3 or 4 years of being able to maintain their payments & getting life back to normal, they are unable to buy a new house, or even remortgage to a better interest rate, and all because Mrs lost her job a few years earlier.
Some may see this as unfair, others may think it’s their own fault and should have had Redundancy insurance to protect the mortgage…
The good news is that mortgage lenders are now opening their doors to applications with historic (and in some cases, recent) adverse credit.
There have a been a few new entrants into the UK mortgage industry in the last 12 months, and these companies specialise in the adverse credit market. Of course, the interest rates aren’t amazing, but they’re not ridiculous either.
Sensibly, the lenders have restricted their products to a only a select few mortgage brokers (they don’t accept applications directly from the public due to their specialist nature) who they feel are able to offer the high quality advice that such clients require.
At Alexander Financial Solutions, we are proud to say we are one of these few select brokers, and are able to advise and arrange these specialist loans.
So if you’ve had a bit a blip in your credit history due to a specific “life event” don’t hesitate to get in touch for a free, no obligation chat on 0113 219 4950.