Lender response

Steve Sandiford, head of borrowing at Birmingham Midshires Solutions, says that a BMS product would be the best solution as it takes into account previous arrears This is not an unusual scenario at all. Without doubt the reason John has been refused credit is to do with the CCJs &#39acquired&#39 during his time at university.

First things first. before settling down to arrange a mortgage, John should be advised to settle any outstanding amounts with the utility companies.

The next immediate step should be to contact the relevant credit-referencing agency (Equifax, Experian, etc.) and ensure that his records are adjusted to reflect the change in circumstances. This will help lenders to build a more accurate picture in future when making any type of credit decision, eg, mortgage, personal loans, credit cards, etc.

More and more poeple do not conform to the standard lending criteria set by many high-street lenders. There are many reasons why an individual may be refused credit, a poor credit history being the most obvious. Others may have simply fallen on hard times or could be victims of circumstance. Trouble can strike at any time – particularly while our individual circumstances are vulnerable to common factors such as divorce, redundancy or sickness.

There could be a number of reasons why a borrower has faced financial difficulty at some time and it is therefore important that each case is judged on its own merit.

As a result, BM Solutions has developed a range of so-called sub-prime mortgages that offer long-term value to those people who have, for whatever reason, experienced difficulties in the past, but are now on a more stable financial footing. In this particular case, John has a decent deposit and more than adequate income to cover the proposed loan amount – £85,000. There&#39s even a little room for manoeuvre if John cannot find anything within his proposed price range.

I would recommend taking advantage of low fixed rates, fixing a major source of expenditure during the initially expensive time of buying and settling into a new home. There has been much press about the advantageous deals available to borrowers in the mainstream market; the same is true for the sub-prime borrower. Fixed rates are at incredibly good levels. BM Solutions currently has a 5.49% fixed until 2004. The client&#39s CCJs will not represent any problems; this product allows a maximum of £5,000. At the end of the fixed term, the product reverts to SVR, ensuring that the client has a transparent and tangible marker against which to track his mortgage.

From a mortgage broker&#39s perspective, the vast proportion of borrowers facing difficulty obtaining a mortgage are still unaware that there are options if they are turned away by a high-street lender. This is an opportunity for the mortgage broker to educate borrowers on the options available to them. In addition to increasing competition and, more importantly, customer choice, traditional high-street lenders have helped to raise the awareness and credibility of sub-prime mortgages among borrowers. And, perhaps, also help to shed some of the stigma attached to a poor credit history.