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21 August 2007
According to recent reports from the banking and loans industries, accessibility to mortgage loans is set to decrease dramatically for those with poor credit, as the credit crunch in the United States starts to take effect across the pond in the UK.
Those with poor credit have always found it difficult to get a mortgage loan with competitive interest rates – this also applied to those with an irregular income such as the self employed or those that cannot prove their income.
However, recent announcements have indicated that the prospect of getting an affordable mortgage – or any mortgage – for those with poor credit is going to become far slimmer.
Default levels on bad credit mortgages in the United States have resulted in the credit crunch, and although most experts state that default levels in the UK are nowhere near as bad as those in the United States, the impact has still taken effect in the UK.
A number of lenders have recently announced that they will be hiking up interest rates on sub-prime mortgages even further, despite the fact that they are already set way higher than on standard mortgages. Some lenders have also announced that they are withdrawing their sub-prime mortgage ranges altogether for the time being.
One lender recently stated: "We are not offering any mortgages at the moment. We hope to do it at the end of the month." Talking about the announcements made by many lenders with regards to increasing sub-prime mortgage rates or withdrawing mortgages from the market altogether, one leading brokers in the UK added: "The borrowers who will notice most are those with the most adverse credit."
According to government figures around ten percent of mortgage loans in the UK are made up of sub-prime loans, which reflects the demand and need for this type of mortgage.
However, experts now state that those with bad credit could find it extremely difficult or even impossible to get a mortgage in light of the current situation.
Although it is hoped that some lenders will increase accessibility to these mortgages in the near future, the prospect of being able to get onto the property ladder for many bad credit consumers looks bleak.
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