It was the sub-prime mortgage crisis that initially triggered the banking crisis that has proved to be the biggest since the great depression. Unfortunately, the latest figures suggest that there might be a return of the crisis in the sub-prime mortgage market.
Many people who are seeking borrowing are finding that mortgages are unaffordable and those without a completely clean credit rating are finding it very challenging to find a mortgage at a good rate. Currently anything with a loan to value rate of above 90% is being considered as sub-prime.
Wriglesworth Consultancy is headed by John Wriglesworth and he said, “Unless we get to see a return of a healthy sub-prime market sector the housing market is never going to return to normal. There needs to be a mix in the market and specialist lending needs to return in order for the whole market to be as it once was.”
Most experts in the property market are saying that lenders are currently only offering to the people they see as the lowest risk and thus these experts are wanting lenders to be more flexible with their loans so that more people are able to enter the property market.
A specialist mortgage lender is Kensington has recently announced that they are going to be launching several financial products that are intended to work even in these times of recession. These products are going to be targeted towards those who have slight credit problems but the company is denying that they should be labelled as sub-prime mortgages.
Harvey Jones is from lovemoney.com and he is commented, “It is good to see the return of this sort of sub-prime mortgage even though it is taking place slowly. Many people have been affected by the financial crisis through no fault of their own and they should not be punished by not being able to get on the housing ladder.”
It is also possible for people who take up this type of mortgage to later be able to switch to a lender who has a lower rate of interest. This is because, as they make regular mortgage payments, their credit rating is likely to improve. However, they might be limited from doing this for a certain amount of time as there often penalties attached to moving mortgage provider during an initial period.
Sub-prime mortgages came to the forefront in the United Kingdom in the early part of last decade and they were given to people who were a higher credit risk, usually because of things such as divorce and redundancy. These people were charged a slightly higher rate of interest because of the increased rate faced by the bank.
Unfortunately, this ultimately led to many people having negative equity and their mortgages became unaffordable. This is what led us into the financial crisis and many people are worried that their return might lead to further troubles.