Bad credit mortgages – some of the problems that have arisen
Over recent months financial markets in the UK have been hit by turmoil. The United States saw a credit crunch that was sparked in the sub-prime sector, and this problem quickly spread to other countries reaching a global scale.
Like other countries, the finance markets in the UK have suffered as a result of these problems, and most sectors of the finance industry have taken a hit, including the mortgage sector.
In addition to the financial companies themselves suffering as a result of the widespread credit crunch consumers have also have to suffer, and none more so than those with bad credit. For the bad credit consumers that are now looking to get mortgages the outlook is relatively bleak, and the financial situation has resulted in decreased accessibility for these borrowers and increased stringency from wary lenders that want to avoid taking risks in the current volatile financial markets.
Mortgage lenders have been really reeling in their lending of late, particularly following the Northern Rock crisis. Mortgage lenders are now tightening their lending criteria, and are far more careful about who they are prepared to lend to. This has resulted in many mortgage lenders taking a high proportion of their bad credit mortgages off the market amidst fears of the risks involved and the chances of problems occurring on the same scale as they did in the sub-prime markets in the United States.
There are still mortgages available for those with bad credit, but many lenders that have kept on some of their bad credit mortgage deals have hiked up interest rates by huge amounts, and this means that consumers that are already struggling financially in many cases may be forced to pay even more for the prospect of home ownership, increasing the chances of falling behind with repayments and ultimately increasing the chances of getting repossessed relatively quickly as a result of this.
Another recent report has shown that not even bad credit customers that think they have secured a mortgage are safe these days. A number of lenders have been finding problems with these bad credit mortgages at the last minute, which has caused massive delays for the buyer despite the fact that they may have already exchanged contracts and are just waiting to complete. The lenders have then used the small print in the contract to get out of having to make the mortgage loan to the bad credit customers, and in some cases the customer has lost thousands of pounds that was paid by way of a deposit because they have been unable to complete.
These are just some of the problems that have arisen for bad credit consumers that are looking for finance, and things could get increasingly more difficult for those in the sub-prime market as the financial turmoil continues to take effect. Those with bad credit that wish to increase their chances of getting a mortgage in the current economic climate could fare better by seeking advice from an independent financial adviser or specialist bad credit mortgage broker, as these professionals tend to have established links with bad credit lenders and could increase your chances of getting a more affordable deal and could decrease your chances of getting rejected thus further damaging your credit.
7th November 2007
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