Carl Wright, managing director at Cartel, is warning that the sub-prime market is in crisis, and runs the risk of becoming the next big miss-selling scandal.
The recently announced Financial Service Authorities investigation into the market he says will uncover how a significant number of brokers are miss advising clients to take out sub-prime mortgages, when 50% of those could take out a near-prime mortgage.
He says: “A significant number of intermediaries are putting customers onto a sub-prime mortgage, when 50% of them could go on a near-prime deal. When the FSA investigates sub-prime it is going to realise that this is not Treating Customers Fairly, and it is going to want to know why advisers recommended this.”
Wright says debts and arrears have increased over the past ten years, but people have reacted by borrowing more, not spending less, which he says is also contributing to a sub-prime crisis.
Wright warns that while some of lenders have realised they’ve taken on business that could be placed elsewhere, others have still not placed their house in order and will fall under the FSA spotlight when the investigation is carried out.