You are here: Home - Better Business - Business Skills -

Time for brokers to target sub-prime clients – Magellan

by: Mark Snape
  • 25/02/2014
  • 0
Time for brokers to target sub-prime clients – Magellan
Those brokers who remember the sub-prime lending market of old will know that those days are gone forever and I doubt we’ll ever see a return to the type of lending that used to take place.

However, the demise of the sub-prime lenders doesn’t mean borrowers with impaired credit records have also disappeared from the market. Far from it. The recession has hit tens of thousands of borrowers hard and many have found themselves facing real financial hardship.

So who are the impaired credit borrowers of today and how are they coping when it comes to mortgage finance?

In broad terms there are three types of impaired credit borrower; the good, the bad and the… let’s call them the under served.

The good are those with a minor credit blip, who can still get credit either from a specialist near-prime or light adverse lender, or from a mainstream lender willing to take a view. Brokers will know that a small indiscretion can be accommodated, if they approach the right financial organisation.

At the opposite end of the spectrum are the bad. These are the habitual debtors; those who will borrow as much as they can without having any real regard for how they repay their debts.

In the pre-credit crunch days, they would merrily remortgage from one sub-prime lender to another, but they have now been effectively ostracised from the market.

These irresponsible borrowers shouldn’t be given access to further credit and the challenge for both brokers and lenders is to identify them quickly and ensure their loan applications go no further.

The final category is the under-served. On the face of it, their historical credit records look pretty alarming, but on closer inspection it becomes apparent that although they may have hit a difficult patch, usually as the result of a one-off life event such as redundancy, which led to arrears, defaults, CCJs and even bankruptcy, they have since managed to get their finances back on track and maintained a clean credit record for the past year or so.

This group deserves a second chance but, until recently, have had nowhere to turn for help. The sub-prime market of old may have died, but the credit repair market lives on and, for brokers, it represents a potentially important income stream.

Mark Snape is managing director at Magellan Homeloans

Related Posts

There are 0 Comment(s)

You may also be interested in