Lenders will consider all types of customers.

Over recent weeks, I've been reporting on the apparent 'interest rate war' currently taking place between lenders assisting First Time Buyers, Residential mortgages and the Buy to Let sectors.  But this is also happening in the ‘Near Prime’ arena. I’m calling it ‘Near Prime’, but it has many other names including, Sub Prime, Credit Repair, Almost Prime, Adverse and so on.  In short, it’s the area of mortgages that cater for those who have had some sort of financial issue in the past.

There are many lenders lending in this arena and they will cater for a missed mortgage payment in the last 12 months, Defaults, County Court Judgements (CCJs), discharged bankrupts/IVAs and those who are in a debt management plan.

There’s no denying that this area of the market took a battering back in 2007 as many, many lenders who offered these types of mortgages were shut down or mothballed. However, the regulatory lending restrictions are now more stringent than back then and the new breed (some never really left) have a whole new outlook on the term ‘responsible lending’.  Where there is demand, there will always be supply.

Rates start from the late 2%s and go right up to the early 6%s, depending on individual circumstances. Lenders will lend up to 85% of the property value in the main and will cater for both employed and self employed.

Financial issues do adversely affect credit scores (the normal assessment process used by a lender to decide whether to lend or not), and as such, some Near Prime lenders will manually review on a credit search, rather than resort to a credit score.

Of course, a lender will only consider those who have endeavoured to right the financial issues of the past. They will not entertain those who continue to flout good financial management.

Finally, the Near Prime lender is a ‘stepping stone’. Most issues tend to disappear from a credit search after a few years. Therefore, the aim would normally be to cater for current requirements on a short to medium term basis with the longer term outlook being structured to enable the customer to get back onto high street mortgage offerings, as quickly and cost effectively as possible.

Active lenders are not just a household name or brand!

I might even be bold enough to start this week’s column by saying the market has turned a huge corner and is on a substantial climb out of the doldrums!  Wow, what a week it has been.  Competition is rife amongst all lenders, from well known high street names; right through to lenders you’ve never heard of; to those funding commercial mortgages; to those specialising in secured second charges; to those looking at investment properties / buy to lets and to those who offer mortgages for complex scenarios that need a little thinking about, outside of the box.

Rates are reducing all across the market and headline grabbers are now sub 2% for a two year fixed and around 2.7% for a five year fixed.  T&Cs apply obviously, but watch out for the fees.  They range from £1,500 to £1,999 and although the rates are great, they might not be the best in the market, if priced over the term period.  For example, a slightly higher rate, with lower fee and free remortgage package (free valuation and solicitors) might work out more cost effective over the same period.   Always review the APR, the rate your mortgage reverts to after the promotional period and always seek professional advice. 

Active lenders are not just those with a household name or brand.  Many smaller funders / lenders located in various parts of the country have money to lend, and at good rates, if you know where to find them.  So don’t be drawn to a lender just because you know their brand.

With this in mind, figures released recently suggest that lending via Building Societies rose 30% in 2012 with net lending of £6.5bn.  And it’s not just for those with a large deposit as almost half of the sectors lending was against 75% of the property value and above.  In addition, Building Societies are more flexible than banks and can manually assess cases, taking a view of the whole scenario rather than a tick box decision.  First Time Buyers, Self Build, Shared Ownership, Home Movers, Buy to Let, Credit Repair and Let to Buys, are just some of the active areas for such institutions.