One in five of the adult population is systematically refused credit from mainstream lenders, research from Datamonitor reveals.
Some 7.8 million people fell within the non-standard bracket at the end of 2002, down from 8.2 million in 1998.
Datamonitor attributes the decline to low rates of interest and unemployment, which have seen levels of arrears and repossessions drop by more than half between 1997 and 2002.
But Stuart Aitken, director of credit at SPML, says: “Personal debt is at an all-time high and we're not going to see low rates forever. That is a pent-up risk for some of the population.”
The non-standard market has grown dramatically and is now worth some £15bn compared to £7.4m in 1998.
Companies such as Halifax through BM Solutions, GE Capital through igroup and Citigroup through Future Mortgages now have a stake in specialist lending, lured by higher profit margins on sub-prime products.
Alex Boorman, Datamonitor's financial services analyst, says: “Companies such as these would not have entered or acquired a presence in the non-standard market if they perceived that doing so would threaten their overall brand. The presence of these companies gives the market greater credibility and respectability.”
However, the take-up of mortgages among non-standard clients remains relatively low. At the end of 2002, 19.8% of non-standard households owned their property with a mortgage relative to 43.3% of the population as a whole.
And the report says self-employment “remains a barrier” to accessing many types of mainstream credit, although the growth of specialist products such as self-cert mortgages is helping the UK's 3.2 million self-employed.