Remember the lessons of the past

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There was much wailing and gnashing of teeth around the recent launch of Magellan Homeloans given the new lender will be offering products to those borrowers who have experienced adverse credit.

Part of me thinks this is understandable especially when we talk about ‘sub-prime’ mortgages given there is a fear of returning to the days pre-credit crunch when responsible lending practices appeared to have been tossed out of the window by many.

Now, however I would give a cautious welcome to Magellan while at the same time pointing out that a number of high-street lenders will already ‘take a view’ on those borrowers who have had County Court Judgements and arrears in the past so perhaps we’re not heralding the first lender back in this sector anyway.

Magellan has specifically said it will only be lending to those borrowers who have experienced a ‘one-off life event’ which resulted in financial difficulty, plus the individual(s) needs to satisfy the lender on the reasons for this and that they are now back on a financial even keel.

As Prime Minister David Cameron might say, ‘I get that’, and I agree these people deserve a second chance and should not be excluded from the mortgage market. However, this is where adverse credit lending started last time and look where we ended up.

It’s my belief that all in this market need to be fully aware of who we lend to – I suspect that pre-credit crunch many lenders had no idea about the individuals they were handing money to. That has hopefully changed and lenders like Magellan specifically operating in this space will know only too well the need for strong underwriting practices and tight criteria.

The fact remains however that not everyone should have a mortgage – we should all bear this in mind as we look at the growing opportunities available in our sector.