Bad credit mortgages in the UK are for people who have a bad credit history. It is not impossible to get a mortgage on the high street if you have a bad credit record, but it is more likely that you will have to use a less well known mortgage lender. The problems of getting a mortgage with an impaired credit record have been in the news a fair bit recently. It goes back to the sub-prime crisis in the United States. Here, lenders were keen to lend money to borrowers when interest rates were really low †around 1% - but when interest rates in the US began to climb, then those borrowers found it more difficult to pay, and many began to default on their mortgages. The result of that was that financial investment packages based on these sub-prime mortgages began to lose value and became virtually worthless. As these packages had been widely sold around the world, many banks saw their investments go up in smoke! The effects came to the UK in September last year, and the banks immediately began to lose trust in each other and refused to lend any money to each other †and then they tightened their lending criteria for loans to individuals as well. Of course, the main group of borrowers to suffer have been sub-prime borrowers †those with bad credit history. It is interesting to note that the keenness of banks to lend rashly to sub-prime borrowers has come full circle, but along the way it has a really bad impact on the world’s economy. Therefore, finding a bad credit mortgage on a UK high street is going to be difficult, so you’re going have to look at sub-prime lenders who specialise in the bad credit mortgage market. It is best to get mortgage quotes from a whole of market mortgage broker who can advise you on the best deals available to you. They will also have lines of communication with the lenders so are able to present your case in the best possible way to secure the best deal for you. They will also know which loans you have a better chance of being granted, and so ensuring that you do not have unnecessary footprints on your credit records from unsuccessful applications. Bad credit mortgages are designed to assist borrowers to own a home even if there have been mistakes in their financial past, such as late mortgage, loan, credit card or rent payments. Bad credit mortgages are also known as non-status, adverse or sub-prime mortgages. The main difference between these and standard mortgages is that bad credit mortgages have a higher interest rate. They have a higher risk than regular mortgages because borrowers have had problems †however small †with their credit history. Although you will have to pay a higher interest rate for bad credit mortgages in the UK, so long as you keep to the agreement of the loan and keep up with repayments, then after three years your credit record will no longer be seen as adverse. That means that after three years you should be able to switch (or remortgage) to a regular mortgage and as a result enjoy considerable savings from the better interest rates available. Companies such as Experian and Equifax keep a track of your credit history which is a file of your credit score. It is a record of any previous loans or credit agreements you may have arranged in the past. Any missed payments, County Court Judgements, arrears and previous mortgage applications are recorded in this file †and count against you. Estimates suggest that one in four British people would not qualify for a standard mortgage from a high street lender which means that they require sub-prime lenders to help them get a bad credit mortgage in the UK. To help them there are many sub-prime lenders in the UK who consider lending to people with bad credit history.
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