MORTGAGE lenders are offering an increasing number of deals aimed at borrowers with poor credit history, according to new research.
The latest figures from personal finance comparison site Moneyfacts.co.uk show that the number of credit-impaired mortgage deals on the market has risen by 118 in the last six months.
This increase of 17 per cent has brought the total of credit-impaired mortgages on the market to 843.
This reflects lenders’ efforts to diversify their range of products to attract different types of customers, according to Moneyfacts.co.uk.
“This is good news for borrowers who have struggled with a poor credit history in the past and had difficulty in obtaining a mortgage,” said Charlotte Nelson, finance expert at Moneyfacts.co.uk.
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“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.”
However, credit-impaired mortgages typically offer both higher rates of interest and fees than other mortgages.
The average two-year fixed rate mortgage stands at 2.54 per cent, 1.98 per cent lower than the credit-impaired average.
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“While the difference may appear stark, the higher prices do reflect the extra risk that is involved to the provider,” Nelson said.
“Although credit-impaired mortgages are slightly riskier, it is by no means a return to the lending style of before the financial crisis.
“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.”