Debt is not something we like to talk about, even if it's in the past, but nonetheless it's something that can affect our future. If you've ever struggled to pay off a loan, credit card or other debt, this can impact many things, including your ability to get approved for a mortgage. That's where credit repair mortgages come in, and the good news is that there are more to choose from now compared with three months ago.
Specifically, our research has revealed that there are now 694 adverse credit mortgages on the market, which marks an increase of 167 over the last quarter, as there were 527 such mortgages in March. "This increase in the number of deals is great news for those who have previously struggled to obtain a mortgage," said Charlotte Nelson, finance expert at moneyfacts.co.uk. "These deals offer a lifeline to those who have experienced a minor blip in the road, allowing them to get back to normality."
With the economic crisis causing financial difficulties for many, it's not uncommon for people to have lived through a blip of some sort. Unfortunately, the effects of the global crisis are still having a knock-on effect, affecting many people's ability to borrow from a mainstream lender. As a result, Charlotte pointed out, "many alternative providers have entered the fray, offering mortgages to those with poor credit histories."
It doesn't look like the need for these types of mortgages will be decreasing soon, either, as Bank of England figures show that consumer lending continues to increase. In fact, the main reason why there are more of these mortgages now is not due to demand, but due to the competitive mortgage rates in the wider market, as Charlotte explained:
"The boost in products can largely be explained by the increased positivity in the mortgage market and the general rise in house prices. However, the market has learned from the past, which means stricter rules are now firmly in place, with many of the lenders offering these deals looking more in-depth into a borrower's history."
If you're looking for a mortgage, always check your credit score first, which is easy enough to do online, as many companies offer free reports. If you find that there are errors in your credit history, contact the relevant companies as soon as possible.
Once you've done everything you can to improve your credit score, you'll have a better idea of whether you can apply for a regular mortgage or will have to find an alternative. The former would be preferable, as the cost of credit impaired mortgages can be significantly higher compared to the rest of the market, due to the extra risk that is involved. Indeed, the average two-year fixed adverse credit rate stands at 4.39% today, which is a whopping 2.12% higher than the standard average two-year fixed mortgage rate.
If you find you won't be able to get a regular mortgage, Charlotte has some final words of wisdom: "Any mortgage seeker considering a credit impaired deal should seek advice from a financial adviser to see if it is financially viable to get such a deal, and whether it is the best choice for them."
Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.