Bad Credit Loans Will Not Return For 5 Years
Over the past couple of months, one or two lenders have announced that they are returning to offering sub prime, or bad credit loans for those individuals with a poor credit history and are unable to be accepted for a home owner loan through a traditional bank or building society.
Although these lenders have said that they are prepared to look at individual cases, they are still only likely to offer a loan to someone who only has some very slight or minor adverse credit against them. Those borrowers with heavy adverse credit, such as large CCJ’s or defaults are still unlikely to be able to get a loan.
Despite this, many people have said that this is a positive step and the start of a return to the sub prime loan market. However, the Council of Mortgage Lenders (CML) disagrees with this view, saying that it is unlikely that bad credit loans will become widely available for at least another five years.
Michael Coogan of the CML said that home owner loan providers are still extremely restricted in their ability to lend and particularly do not want to take the risk of adverse credit loans. For those that do offer sub prime loan products, the cost is likely to be so high that they will be unaffordable for borrowers.
He also commented that the Financial Services Authority (FSA) were unlikely to support lenders wanting to offer sub prime loans, believing that potential borrowers should sort their finances out first and pay off their existing loans and other debts before they look to borrow more.
Mr Coogan said “It’s not a positive picture for sub prime coming back in the near future, or even the next five years. If it comes back it will be in a very small scale, closely regulated way and if it is properly priced for risk the price itself may just be too high for customers to bear.”
