While many consumers were ignorant as to what this sector actually covered, they were clearer as to who could benefit from it. 42% of respondents identified ‘people with credit problems’ as the primary users, whilst 21% felt the market targeted ‘the self-employed’. However, a worrying 20% considered it to be a market for ‘people who need to borrow above their income multiples’, 10% stated that they thought it was for divorcees’ and 8% for the unemployed.
The survey went on to reveal that in a society where 30% of people admitted to credit difficulties, very few people had any real knowledge of the specialist mortgage products available to help them purchase a home.
Just 42% of respondents correctly identified a ‘sub-prime’ mortgage as one that could be taken out by people who had credit difficulties in the past. The remaining respondents believe this type of financing combined different interest rates (40%), was any mortgage you got from an institution other than a high street bank (11%) or allowed you to borrow more than five times your salary (8%).
Possibly due to the extensive interest this type of product received after the BBC Watchdog programme in 2004, more consumers correctly identified what a self-cert mortgage is (69%). However, there was also a certain level of ignorance with 13% believing this is when you employer certifies your income, 10% a type of financing which allows irregular payments and 9% saying it takes into account previous payment history.
However, the report did reveal some good news with 44% of consumers saying that if they had credit problems and needed a mortgage they would firstly speak to an independent financial adviser. The remaining respondents would visit their bank first (22%), their building society (21%) or a specialist lender (12%).
Women vs. Men:
Although more women (20%) than men (16%) claimed to have heard of the non-conforming market, they were more shaky on the actual product details. More men than women understood what a sub-prime mortgage was (women: 39% vs. men: 49%) and a self-cert mortgage (women: 66% vs. men: 76%).
This is highly concerning as more women (32%) than men (25%) said they had missed credit card payments, been made unemployed/redundant or bankrupt – making them likely candidates for the non-conforming market. This research really shows that women need to push through gender stereotypes and take responsibility for their own finances.
Nicola Severn, marketing manager at Beacon Homeloans commented:
“With more and more consumers facing credit difficulties, there will be an increasing number of people who will not be able to get a ‘high street’ mortgage and must look elsewhere for financing. Therefore, it is imperative that we educate consumers as to the existence of the sub-prime market and what it can do for them.
This research reveals that while there is a worrying lack of general understanding about the sector, some consumers do have a basic understanding of the products available and causes of credit problems. The extensive education with regards to the importance of independent financial advisers also seems to have entered the psyche of most consumers. It is good to see that for 44% of people IFAs would be their first port of call if they needed a non-conforming mortgage.
While is it heartening to see that there is some knowledge of the non-conforming sector, it would be good to see this level of knowledge increase substantially. The financial services industry needs to work together to make sure that all consumers understand that just because they have had credit problems in the past doesn’t mean that they can never get a mortgage.”
