Southern Pacific Mortgage Limited (SPML) is to launch into the larger loan market following the entrance of a number of sub-prime players into the market, writes Rachel Williams.
Commenting on the move, Stuart Aitken, director of credit at SPML, said: “This is a natural addition to our product range. We are fulfilling a niche need that is not generally met in the mainstream market.”
While the lender had granted some loans above its £250,000 threshold on an ad hoc basis, it is now committed to servicing borrowers that require loans up to £1m.
Because of the risk, the lender has had to reduce maximum loan to values ratios, as well as the level of impaired credit it is able to accept. Loans will be available up to 80% LTV with rates starting at 3.25% above LIBOR for purchase and 3.75% over LIBOR for remortgage. Rates rise to 3.5% and 4% over LIBOR depending on credit history and LTV.
Platform Home Loans entered this market in July 2000 while Mortgages plc made its entrance in December 2000.
This trend appears to suggest a growing confidence in the sub-prime sector. “This illustrates our lending to date has been successful and is something we can do without extending our risk unduly,” said Aitken.
Paul Howard, sales and marketing director at Mortgages plc, agreed and said the trend gives out a positive message about the state of the sub-prime sector.
He said: “Historically the sub-prime market has been seen to have lower quality applicants, but this illustrates how anyone can end up with credit problems – it is nothing to do with class or occupation. We are comfortable with such large loans and we do make sure we get a lot of equity from the borrower in the deal.”
The development addresses an increasing demand for larger loans in the sub-prime market. Approximately a quarter of Mortgages plc’s last securitisation comprised of loans in excess of £150,000.