Borrowers with an adverse credit history surged in 2017 and the number is set to keep growing in the coming months, Barnard told delegates at The Mortgage and Protection Event in north London.
But the risk that underpinned the market crash 10 years ago has been removed, because borrowers can’t self-certify income and must now pass affordability tests, according to Pepper’s sales director.
Barnard said: “Sub-prime is coming back to a degree… but the big difference is, it has to be affordable, and that is the massive difference.
“It doesn’t just have to be affordable at today’s rates, it has to be affordable at rates with a 3% loading on the underlying rate.”
The sector now provides an opportunity for brokers, amid a growing number of people with adverse credit history, according to Barnard.
The number of County Court Judgements (CCJs) registered against consumers has hit its highest level since 2008.
CCJs are just the tip of the iceberg, amid an increase in the amount of consumer credit, according to Barnard.
The proportion of brokers reporting an increase in clients with adverse credit has jumped by around a third in 2017 compared to last year, research by Pepper Money found.
But these borrowers are no longer frozen out of the market because specialist lenders are willing to take on the business.
For example, Pepper Money will consider borrowers who have been issued with a County Court Judgment (CCJ) issued in the past year, provided at least six months have passed.
And Vida today loosened criteria for impaired credit borrowers, allowing up to three missed unsecured payments in the last six months.