Is the second coming of the credit crunch imminent? Superhero Sub prime lenders needed to avert impending crisis…
Although we like to think of the UK being a major ‘financial power’ with London being one of the main world stock trading centres, in reality our economy is driven by events happening elsewhere in the world and we are like the sheep rather than the shepherd steering the herd.
The world is on it’s knees financially with the US on the verge of a default on it’s debt and the Eurozone in danger of collapsing and the Bank of England is likely to look over the Atlantic to the unstable economy in the US and the knock on effect that this will have on the UK’s economy when meeting to discuss the target for inflation, economic growth and the setting of UK base rate to control these factors. In reality all the Government austerity measures and low base rate could be for nothing if the US catches another serious cold.
This butterfly effect last occurred during the sub prime crisis which originally started in the States but impacted in the UK in August 2007 as many of the UK lenders were exposed to buying ‘mortgage backed securities’ on the financial markets. The problem was that these mortgage bonds were being rated ‘triple A’ which was supposedly packages of ‘super prime’ vanilla lending (Should have a very low default rate) when in reality these bonds were peppered with a great deal of sub prime, self cert and ‘ninja’ mortgages which obviously started to default significantly higher than expected, which in turn caused the inter-bank markets to freeze through lack of trust.
No one ever believed a Bank could fail but when the true picture emerged of the various Bank’s over exposure to this defaulting debt, no Bank was willing to lend to another Bank. As many bad credit mortgage lenders relied on these markets to finance their lending activities, overnight the sub prime market collapsed with no funding available. Many found that they were unable to refinance short term lending falling due which put them out of business for good. I can recall 13 specialist subprime lenders but as the majority of the backing for these lenders came from the States, they are no longer in existence.
Rest in peace: Rooftop Mortgages, Victoria Mortgages, Unity Homeloans, DB Mortgages, GMAC, Mortgages PLC, SPML, Preferred, Infinity & Future Mortgages, who no longer exist for new lending. First National & I Group have phoenixed into GE Money Home Lending and of the original sub prime lenders only Blemain (in a very restricted lending manner) & Kensington Mortgages are still lending in this niche area.
In the last recession, the emerging bad credit mortgage lenders created bespoke products to fit the needs of people at that time who were facing repossessions, had defaults and CCJs or were coming out of bankruptcy but with these specialist lenders gone – who will step into the void to avert the impending crisis now?
Thankfully there are some new entrants into the market with Aldermore Mortgages , Precise Mortgages & MBS Lending willing to lend subject to specific criteria. Kensington Mortgages still appear to be the driving force behind lending criteria enhancements with 90% loan to value available as long as no Defaults or CCJs within the last 2 years. However any discharged bankrupts are still going to struggle getting a mortgage and with the effects of the recession still biting, we need a sup prime superhero of the likes of GMAC and Kensington of old to drive the adverse credit mortgage market forward. As the majority of the UK no longer fit high street lender’s criteria, this is the only way the housing market will start to recover.
Mosaic Mortgages are specialist bad credit mortgage advisors and we can assess your particular circumstances and advise you of the most appropriate mortgage for your needs. Contact us for a no obligation quote and to see whether you are eligible for any of the specialist bad credit mortgage schemes currently available.