Moore Blatch argues that using nationalised banks to offer sub-prime mortgages would give these borrowers access to the property market which they wouldn’t have otherwise.
The firm says that the number of those who would be classed as sub-prime is nearing one million. Based on data from the Council of Mortgage Lenders and the Bank of England it says that more than 50,000 consumers would have fallen into the sub-prime category in the first three months of the year, given the 16,000 bankruptcy petitions and almost 36,000 insolvencies that occurred in Q1.
Moore Blatch believes that many borrowers are being classed as sub-prime through factors out of their control, such as redundancy or loss of earnings.
The firm has also called for universal regulation to applied to credit providers and mortgage lenders, to avoid cases where applicants are turned down on an LTV basis only for the same applicants to get credit from inappropriate credit card or loan providers.
Paul Walshe, partner and head of lender services at Moore Blatch, says: “Unless the sub-prime market returns we will create a housing underclass, many of whom ended up there through inappropriate lending by credit providers who took no account of the possibility of future personal or broader economic conditions.”