Choice of credit-impaired mortgages shrinking, analysis finds
The choice of mortgage deals for borrowers who have dents in their credit history has been shrinking in recent months, analysis has found.
The number of credit-impaired residential mortgages, which are tailored to borrowers who have experienced financial issues in the past, has fallen by 261 to 590 products over the past six months alone, according to Moneyfacts.co.uk.
In October last year, there were 851 deals available.
But Moneyfacts said that while the choice of this type of mortgage deal is becoming more limited overall, average rates on two and three-year fixed deals have fallen since October last year.
The average credit-impaired two-year fixed-rate mortgage rate has fallen by 0.13 percentage points since October to now stand at 4.36%, while the average three-year rate has fallen by 0.30 percentage points to reach 4.21% over the same period.
Darren Cook, a finance expert at Moneyfacts.co.uk, said: “Credit-impaired mortgages are an essential option to those borrowers who have experienced minor financial issues and were previously excluded from negotiating a new mortgage deal due to a lack of product availability following the financial crisis.”
He continued: “Back in August 2007, when lending principles and regulatory guidelines were much looser than they are today, there were 5,106 credit-impaired deals available – nearly 10 times as many as there are now – which accounted for a whopping 55% of the entire residential mortgage market.”
Mr Cook said borrowers looking for a longer-term credit-impaired mortgage may also see rates have increased, with the average five-year fixed rate having increased from 4.76% to 4.92% in the past six months.
He said: “The credit-impaired mortgage market is considered a specialist lending sector, so it is no surprise that, according to Moneyfacts research, 91% of the total number of credit-impaired mortgage products are only available through a mortgage broker.
“It is clear that any borrower seeking a credit-impaired mortgage would be wise to speak to a mortgage broker first.”