David Copland: Pink Home Loans 4The US housing crisis has had a marked effect on UK markets, so much so that the majority of sub-prime lenders have revised their rates and criteria on a daily basis to reflect investors’ lack of confidence in the market. This has resulted in no lenders wanting to leave themselves exposed in a market niche that no-one else wants to partake in.

There are lenders that are still offering heavy adverse and unlimited products, but these schemes will usually restrict the amount of recent arrears incurred and limit the LTV.

The disadvantages to this particular case are that the client is already with a sub-prime lender and a lot of sub-prime lenders insist on the last three mortgage payments having been made in full and on time, if remortgaging from sub-prime to sub-prime. Also, the applicant has only been in his current job for two months. Although he may not be subject to a probationary period and this is a permanent position, most lenders still insist on a minimum employment time of three months.

The advantages to this case are the reasonable LTV, his continuous permanent employment and also the fact the client is planning to better his financial circumstances by clearing his CCJs, getting a better rate to reduce his monthly mortgage payments. He is currently on a variable interest rate and given all of the recent rate increases during the past year, the rate is certain to be high.

However, at present, there are no lenders who would be willing to lend under these circumstances. Therefore, I would recommend that you revisit your client in another two months for a follow-up financial check.

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If your client has continued to pay his mortgage payments in full and on time, and is subject to no other changes in his circumstances or in lenders’ criteria, then Future Mortgages would consider this mortgage, under its two-year very heavy adverse scheme fixed at 8.8%.

Pink Home Loans is also offering a free valuation and free legal fees for remortgages on this product. The flat arrangement fee of £995 can also be added to the loan – this is likely to help the client as no upfront fees are required. n

John Smith: GHL

4Although the market for sub-prime has shrunk, as lenders have heavily revised their criteria in light of the present liquidity crisis, there are still a few lenders willing to consider cases such as your client’s.

One caveat here is that any example given is likely to be quite short-lived. Although the frenzy of rate changes seen a month ago is dying down, the market is still experiencing problems. Rates are being revised and products are either changing their criteria or being withdrawn completely. Most lenders require a customer to have been in their current employment for between three and six months, so we shall assume that the client in question is not on a probation period.

The variable rate on an adverse mortgage is not something anyone would want to pay for any length of time and the market’s problems over the past few months have not improved matters.

After reviewing our panel of lenders, the best option for this client would be a lender who will allow a sub-prime to sub-prime remortgage with no restrictions. Lenders quite often load or limit the number of arrears they will allow if the client is currently with a sub-prime lender, regardless of their standard criteria. However, lenders differ in who they consider to be sub-prime, so it is always worth checking, but in this case your client is definitely adverse. 

The lender we have managed to source does not have any additional criteria. We were only able to source one suitable lender from our panel that allow unlimited arrears, CCJs and two months’ employment. Your client is able to choose between a fixed or discounted rate – both are set at two years with early repayment charges (ERCs), but not extended.

Although paying off the CCJs now does not affect the choice of product currently available, as most lenders do not ignore CCJs until paid off for more than one year, in the long run your client will see the benefit when it is time to remortgage.

Your client’s salary is well within affordability for the product, assuming there are no other credit ­commitments, and as he is trying to improve his credit rating, he should consider remaining with this product until it expires – this will ensure he does not incur ERCs. If your client can keep his payments up-to-date and not incur any further bad debt, he should be in a strong position to obtain a more ­competitive product at remortgage. n