Greater choice of adverse credit mortgage deals now available

Posted 10 July 2017

Homebuyers with a poor credit history are actually finding a greater choice of mortgages available today, says new data...

Figures from the TUC in 2016 suggested that 1.5million households in the UK were living in extreme debt. If you have struggled to pay a mortgage, loan or credit card in the past then it may have impacted on your credit rating, making it more difficult for you to borrow now.

However, new research has found that the choice of mortgages for borrowers with adverse credit has risen significantly in the few months.

Credit repair mortgages “offer a lifeline” to many borrowers

According to the TUC, more than three million UK households are in ‘problem debt’. Struggling to pay your credit card or loan can make it tough to get a mortgage, but new figures show that the choice of ‘credit repair’ mortgages is on the up. Research by financial analysts Moneyfacts has revealed that there are now 694 adverse credit mortgages available in the UK, an increase of 167 on the number three months ago.

“This increase in the number of deals is great news for those who have previously struggled to obtain a mortgage,” says Charlotte Nelson, finance expert at Moneyfacts. “These deals offer a lifeline to those who have experienced a minor blip in the road, allowing them to get back to normality.”

If you have experienced any debt problems then it may make it tough to get a mortgage with a mainstream lender. However, a number of alternative providers now offer credit repair mortgages meaning borrowers with less than perfect credit can potentially get the home loan that they need, and with Bank of England figures showing that consumer lending is increasing, these types of deal are expected to be around for a long time to come.

Nelson adds: “The boost in products can largely be explained by the increased positivity in the mortgage market and the general rise in house prices. However, the market has learned from the past, which means stricter rules are now firmly in place, with many of the lenders offering these deals looking more in-depth into a borrower's history.”

Shop around as credit repair mortgages are generally more expensive

If you’re worried about getting a new mortgage, experts suggest that your first step should be to check your credit history. A number of companies offer this service online and many offer a free report. Once you have your report you can correct any errors and begin to take steps to improve your credit rating.

If you can get a mainstream mortgage you are likely to be better off by doing so as credit repair mortgages are generally more expensive. Moneyfacts says that the average two-year fixed adverse credit mortgage rate stands at 4.39%, 2.12% higher than the standard average two-year fixed mortgage rate.

If you find you won't be able to get a regular mortgage, Nelson adds: “Any mortgage seeker considering a credit impaired deal should seek advice from a financial adviser to see if it is financially viable to get such a deal, and whether it is the best choice for them.”

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