Moore Blatch warns that the number of people classified as ‘sub-prime’ is fast approaching one million, virtually all of whom are currently excluded from the property market.
In the first quarter of this year alone over 50,000 people would have fallen into the ‘sub-prime’ classification with over 16,000 bankruptcy petitions and almost 36,000 personal insolvencies.
Moore Blatch advises that using a nationalised bank to offer sub-prime mortgages is one of the most effective ways to allow borrowers to get a foot on the property market, many of whom are sub-prime through no fault of their own having suffered redundancy or loss of earnings.
However, Moore Blatch also believes that there should be harmonisation of regulation across credit providers such that mortgage lenders and other credit providers have equally rigorous controls. Regulation should prohibit a situation where a mortgage lenders rule on a ‘loan to value’ can be usurped the very next day by inappropriate lending by credit card or loan providers.
Paul Walshe, partner and head of lender services, Moore Blatch, said: “Unless the sub-prime market returns we will create a housing underclass, many of whom ended up there through inappropriate lending by credit providers who took no account of the possibility of future personal or broader economic conditions.”
