Grey Cloud over Secured Loans Market?
There seems to be an overlap or grey area forming between Sub Prime and Prime Mortgages. A number of mainstream mortgage companies, for example the Leeds Building Society, are now offering what they called ‘Credit Repair Mortgages’. These are being offered to people with credit blemishes rather than poor credit records.
It appears the grey market customers are people who are what the Industry calls ‘Light Adverse’. These are people with things like County Court Judgements that are a certain period old or people that have just missed a few payments on their regular mortgages.
Some of the new Credit Repair Mortgage lenders are even offering borrowers the chance to switch, with no penalties, to a Prime Rate Mortgage after 3 or so years, if the borrowers credit record improves.
I suppose this activity could slightly start to eat into the Secured Loans market and I guess the reasons for Prime Rate Lenders moving into this market can be summarised as:-
- Sub Prime now accounts for a higher percentage of the overall market than it did 5 years ago. Growth in Sub Prime lending has outpaced the mainstream market.
- Prime lenders can charge more by lending to Credit Impaired borrowers.
- Prime lenders realise that people, with previously good financial track records, can have there credit record impaired purely through things like divorce and redundancy and can therefore represent less of a risk than ‘normal’ Sub Prime borrowers.
If you have any thoughts about this let me know - PLEASE!
