Poor credit isn’t something you could realistically call a rare issue. In fact, it’s becoming increasingly rare for any everyday member of the public to have a flawless credit report. But despite the prevalence of credit issues in the UK, the availability of bad credit mortgages has traditionally been limited, to say the least.
In fact, the vast majority of mainstream lenders have been unwilling to offer bad credit mortgages of any kind.
Nevertheless, we could be seeing the earliest signs of the tides finally turning in favour of the everyday borrower. Virgin Money has just announced that for the first time, applicants who have “satisfied” CCJs up to £500 on their credit reports won’t necessarily be counted out of the running.
Prior to the adjustment, Virgin Money refused outright to accept any applications from candidates with CCJs.
Addressing the Realities of Everyday Life
A mortgage is the single most important secured loan the average individual will apply for in their lifetime. Hence, the prospect of failing to qualify for a mortgage can be disheartening and distressing.
The problem is that with credit reports often being interpreted by major lenders as the be all and end all, poor credit applicants are excluded more often than not. What’s more, evidence suggests that the number of CCJs being passed in England and Wales every year has hit a record-high.
In fact, an astonishing 1.38 million CCJs were passed in 2017 alone. Traditionally, this would mean 1.38 million cases where mortgage applications would be refused without fair consideration.
Speaking on behalf of John Charcol mortgage advisers, Nicholas Morrey stated that the decision made by Virgin Money represents a welcome U-turn in the industry’s traditional stance on CCJs.
“Given the complexities of modern life, and the fact minor adverse entries on credit files are on the up, we believe that Virgin are simply recognising modern life,” said Morrey.
“If someone has a dispute with a mobile phone provider, for example, that they cannot resolve through a customer services department that is remarkably quick to lodge a default or a CCJ then that does not necessarily mean they are a bad prospect for mortgage purposes,”
“Virgin’s approach is a positive one that we welcome for minor adverse cases that could otherwise cause borrowers to be forced out of mainstream lending towards ‘sub-prime’ products for years just for a misunderstanding that has led to an unfortunate conclusion with expensive ramifications.”
Accessibility vs Affordability
Along with Virgin Money, there’s also a growing contingency of specialist lenders in the UK offering poor credit mortgages for ‘subprime’ applicants. The vast majority of which won’t be found on any UK High Street, instead operating as part of a dynamic specialist lending sector.
Rather than applications being rejected purely on the basis of credit scores, these lenders are considering all cases fairly by way of their individual merit.
In terms of accessibility therefore, the answer is yes – poor credit mortgages are gradually becoming easier to access. Nevertheless, there’s still a price to be paid for obtaining a loan within the ‘subprime’ category.
The issue is that the moment your credit report is hit with a CCJ or similar, interest rates and overall borrowing costs increase. Sometimes modestly, other times more significantly – subprime mortgages almost always attaching higher borrowing costs.
Nevertheless, it’s still perfectly possible to access a competitive deal, simply by carefully considering all options available. Before penning an application for a subprime mortgage, it’s important to seek professional support from an independent adviser or broker.
Considering all available options both on and off the High Street holds the key to finding an affordable deal, however imperfect your credit score may be.
Article by iConquer