Number of sub-prime deals slashed by over 80%
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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.”
