Abacus Daily Debt News

Sub-Prime home loan costs going through the roof

Borrowers with poor credit histories are in danger of having to pay £1000’s more to secure a mortgage as the backlash from America takes hold.

It is estimated that up to 25% of people who secured so called sub-prime home loans in August would be turned down if the applications were made now.

Those who do secure a mortgage offer will find some deals charging more than 10% annual interest. Lenders, and it has to be said here probably not before time, are tightening up lending criteria and are now starting to steer clear of high risk borrowers. Those that will lend to those with poor credit histories will make them pay for it.

It is not just home loans that are being affected, figures from MoneyExpert.com indicate that up to 2 million people who have applied to banks for unsecured loans in the past 6 months have been rejected.  For more and more people with credit woes, debt management is becoming the only option to reduce credit commitments.

With the overall cost of borrowing likely to rise sharply, so think very carefully before borrowing in the current climate

Currently the sub prime mortages are 8% of the market, but account for 70% of repossessions according to research from BBC’s Panarama.

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