I’ve watched with a certain amount of foreboding as lenders cranked up rates on non-conforming products and squeezed criteria over the last few weeks. Now, with the dust starting to settle a little after all the panicking and turbulence, the world that is appearing isn’t looking good for those at the bottom end.
As was suggested by brokers in your news story last week (MI, 1 September 2007, ‘Heavy adverse market ‘to disappear’’) those at the bottom end of the market are really looking down the barrel of a loaded gun at the moment. Lenders have been gorging themselves in recent times, extending criteria and throwing money at those who have racked up multiple credit infringements. But with the market now in a tailspin, they have been stampeding out of the heavy and unlimited adverse sectors, leaving those clients in need of this finance under their feet.
But it is these people that need the most help. These are the people that have had serious financial problems in the past and, coupled with the hikes in interest rates, are in need of competitive and innovative solutions to help them keep their heads above water. Lenders seem to be ignoring this though, as their exit from this end of the market means that refinancing in future will almost be impossible and many people could find themselves out on the streets.
So the question must now be asked as to what can be done to stop this horrendous scenario for thousands of people? You would have to ask questions of why mortgage lenders were providing such products if they thought there was such a high risk surrounding them and whether intermediaries should have been advising clients to take on such a mortgage if they knew they’d have problems if the market turned.
However, we all find ourselves in this situation now and it is our duty, as responsible professionals, to make sure this bracket of clients aren’t left in the mire. I await the industry’s response to this with great trepidation.
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