According to new data from the UK's Council of Mortgage Lenders, over 5% of total mortgage lending in 2005 was probably 'adverse credit' lending to people with previous credit problems.
The Council of Mortgage Lenders (CML) said that this makes ‘adverse credit’ lending the largest specialist sector after buy-to-let.
Nearly half of adverse credit lending is to people in the less serious ‘low adverse’ category, and less than a quarter is ‘high adverse,’ the CML said. It also revealed that four fifths of adverse credit mortgages are sold through intermediaries, compared to less than 60% of non-adverse.
The data show that two thirds of adverse credit mortgages are remortgages – compared to about half of non-adverse loans. In addition, remortgagors with adverse credit histories are unsurprisingly more likely to borrow more than their previous mortgage to consolidate other debts than their non-adverse counterparts.
Compared with non-adverse borrowers, borrowers with an adverse credit history are a little older, more likely to be self-employed, and more likely to have mortgage debt payments that are a relatively high percentage of their income, the CML found.
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, stated CML head of research Bob Pannell.
There are many flavors 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, he continued.