A former Banco Santander employee has revealed to Mortgage Strategy that Abbey has been investigating opportunities in the mortgage market with an eye to launching a light prime range for borrowers with slight adverse credit histories.
Last September, Mortgage Strategy reported that lenders are starting to relax their criteria and accept sub-prime cases as competition in the prime market hots up.
At the time, Abbey admitted that affordability calculators help it judge what people can afford but maintained that it was not operating in the sub-prime or near prime markets and that all such cases are referred on.
However, the source says Abbey has decided to revise its position because it is missing out on the higher margins enjoyed by true sub-prime products.
And Andy Pratt, chief operating officer at Alexander Hall, says: “I expect one prime lender will make a move into sub-prime during 2007 and I wouldn’t be surprised if it is Abbey.
“Abbey doesn’t publish its criteria but considers adverse credit clients on a case by case basis. This is good news for clients because they get better rates, but is difficult for brokers because they don’t know where criteria start and stop.”
He adds: “The question is whether Abbey will decide to publish its criteria in the future. If the volume of adverse credit clients is high enough it may.”
He says research by Alexander Hall shows that last year it experienced a 15% increase in the number of clients with credit problems but its lending profile did not change. He attributes this to Abbey and other prime lenders considering clients with credit problems.
A spokesman for Abbey declined to comment on any imminent launch into the sub-prime market. The bank’s annual report is due out on February 1.
Last week, Abbey launched a five-year fixed rate stepped product with a rate of 3.99% that increases to 5.79% in the second and third years and to 5.99% in the fourth and fifth years.