Number of sub-prime deals slashed by over 80%

Natalie Martin
28-Aug-2008
The number of sub-prime deals on the market has decreased dramatically since July last year, falling from 8,148 to just 1,252, figures from Moneyfacts.co.uk show.
Darren Cook, mortgage expert at Moneyfacts.co.uk, says many sub-prime borrowers are going to come unstuck when they come to remortgage, with just 13 lenders offering sub-prime products, compared to 36 in July 2007.

Cook says: “Last year the market for sub-prime was so competitive that some rates being offered were only fractionally higher than standard residential rates. Now, as lenders continue to factor in margins for higher risk, sub-prime customers are paying the price with rates up to 2.75% higher than the same time last year.

“Many borrowers on a light level of sub-prime assumed that if they kept on top of their financial affairs once their deal ended they would be able to move to a much cheaper standard residential deal, but due to stricter lending criteria from prime lenders this isn’t necessarily the case.”

Cook says of those that can’t get a new standard residential deal, they will need to try and find a new sub-prime deal or have no alternative other than moving onto the revert to rate of their existing deal, which currently stands at 9.43%.

Cook adds: “Borrowers could be facing up to a £360 hike in their monthly repayments, which could be a step too far for the majority. As a result we are likely to see more people facing the prospect of repossession as more and more deals come to an end in the near future.”