That is not to say that the need for non-conforming has not always existed, but the sector in its modern, organised form now commands around 15% of the market. Prior to the arrival of non-conforming lenders customers needing a mortgage but unable to borrow were forced to pay exorbitant rates. Not so now. There are many deals available and, compared with the conforming sector, rates are not that far apart. The customer is getting an improved deal via choices including discounts for up to three years, fixed rates or a straight variable rate.
One area where non-conforming lenders really have made their mark is in variable rates. The charge used to be that variable rates were not anchored to any index. Many non-conforming lenders from the outset offered a rate liked to something like a base rate tracker or three-month LIBOR. This is good for customers. Their mortgage rate only moves when market rates move. Occasionally this means that rates change slightly early as the nature of LIBOR is to predict market rates but customers can't have it both ways.
In reality the lender's deal with the customer is straightforward: agree the loading depending on the level of adverse credit, add the LIBOR element and the deal is agreed. But many mortgage customers do not have the benefit of any such a rate-linking mechanism.
We all hope that interest rates will begin to fall at the end of next year. It's when rates are falling that consumers become aware of how their rate is working for them. If lenders are to enjoy the full confidence of consumers they must demonstrate that they are acting in their best interests. The 'quick to increase rates, slow to put them down' charge plays badly in the consumer press.
But that's some time off. Let's hope that the recent increases were the last. There are signs that the market is slowing. What was interesting was that Monetary Policy Committee's decision in September when it voted to hold the base rate as there were signs of cooling in the housing market.
So, from the low point we have seen a 1% increase. On a mortgage of £100,000 that's an extra £83 per month. For some, that added burden will hurt. Perhaps those customers who opted to take a rate linked to a tracker mechanism will feel they got good value – and a fair and transparent deal.