Recent reports have shown that the global credit crunch that has stemmed from the problems with mortgage defaults in the United States could make things extremely difficult for those with patchy credit histories that are looking to take out a mortgage. Many sub-prime lenders have announced that they will be withdrawing their sub-prime mortgages in the UK, with many others stating that they will be pushing up interest rates on sub-prime mortgages by significant amounts, which will mean that those with bad credit will either not be able to get a mortgage or will have to pay through the nose for the privilege.
Northern Rock is the latest in a line of sub-prime lenders that has decided to whack up interest rates on their mortgages for people with bad credit, with around 1.25% expected to be added by the end of the month. Some lenders have taken their mortgage off the market on a temporary basis, and plan to relaunch the mortgages in the coming weeks with raised interest rates. This could make the problem of defaults worse in the UK with bad credit customers only able to get very high interest loans, resulting in an increase in the number of people unable to keep up with repayments.
Experts state that the lending criteria and regulations with regards to sub-prime mortgages is already far more stringent in the UK than in the United States, and therefore problems should not escalate to the level that they have across the pond. However, this tightening of lending to those with bad credit could make a huge difference to those with tarnished credit or irregular income, making it very difficult for them to purchase a property.
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