The main reason for this is lack of choice in terms of the number of lenders offering sub-prime products and the number of actual products themselves. In July last year the sub-prime sector offered 8,148 sub-prime residential mortgage products compared with just 1,252 today. The number of lenders offering such products has dropped from 36 in July 2007, to just 13 today.
Now, as lenders continue to factor in margins for higher risk, sub-prime customers are paying the price with rates up to 2.75% higher than the same time last year, according to Moneyfacts. For some that will be a step too far especially those looking to remortgage at the moment.
Darren Cook, mortgage expert at Moneyfacts.co.uk, commented: “Last year the market for sub-prime was so competitive that some rates being offered were only fractionally higher than standard residential rates. Many borrowers on a light level of sub-prime assumed that if they kept on top of their financial affairs once their deal ended they would be able to move to a much cheaper standard residential deal, but due to stricter lending criteria from prime lenders this isn’t necessarily the case.
“Of those that can’t get a new standard residential deal, they will need to try and find a new sub-prime deal or have no alternative other than moving onto the revert to rate of their existing deal. With this rate currently standing at 9.43% this could prove costly.
“Borrowers could be facing up to a £360 hike in their monthly repayments, which could be a step too far for the majority. As a result we are likely to see more people facing the prospect of repossession as more and more deals come to an end in the near future.”
