Credit-impaired mortgage deals increase as rates rise 0.17% – Moneyfacts

However, despite this boost in the number of deals, the two-year fixed rate for those with a poor credit history has risen by 0.17% in the past six months to stand at 4.52% against 4.37% in August 2017, according to Moneyfacts.

Credit repair mortgages represent a small proportion of the mortgage market – just 17%. However, the firm said this increased availability was good news for borrowers who have struggled with a poor credit history in the past and had difficulty in obtaining a mortgage.

Although credit-impaired mortgages are slightly riskier, it is by no means a return to the lending style of before the financial crisis, Moneyfacts noted.

Back in August 2007, there were 5,106 credit-impaired deals, which accounted for 55% of the residential mortgage market.

“At the time lending principles were significantly looser than today. Lenders are now required to delve a lot deeper into a borrower’s financial history to ensure they are able to afford the deal,” it added.

Last week All Types of Mortgages chairman Vic Jannels told Specialist Lending Solutions that he welcomed the developments in this part of the market and that lenders were on the whole coping with it well.

Lenders branching out

Moneyfacts spokeswoman Charlotte Nelson said: “With fierce competition in the mainstream market, providers have opted to branch out into more niche areas, including adverse credit mortgages. This extra attention has resulted in an increase in the number of deals available to this type of borrower.

“Not only have rates risen dramatically but, as to be expected, the prices offered by these deals are far higher than standard options on the market. For example, the average two-year fixed rate mortgage stands at 2.54%, a massive 1.98% lower than the credit-impaired average. While the difference may appear stark, the higher prices do reflect the extra risk that is involved to the provider.

“It would be wise for any borrower who is unsure about their credit history to check their file online, amending any errors. If they feel their score is low, trying to improve this will boost a borrower’s chances of acceptance.

“These deals offer borrowers who have experienced minor issues in the past a lifeline to get back on track once more. However, any borrower considering this as an option should first seek advice from a financial adviser to ensure it is the right choice for them,” she added.