Housing victims back in business
It is possible to get a new home loan if you defaulted on the last in the recession. But it costs, warns Felicity Cannell
Sunday 07 September 1997
There are now hundreds of thousands of borrowers who have felt the scourge of repossession in recent years and, despite reports of a booming housing market, figures for repossessions remain surprisingly high at 650 a week - equivalent to more than 30,000 households a year.
The companies that specialise in lending to people with poor credit histories are under increasing scrutiny from the Office of Fair Trading (OFT) to ensure they do not overly penalise clients with excessive interest rates and outrageous charges for early repayment of loans. One lender, City Mortgage Corporation (CMC), has been the focus of intense media coverage because of its so-called dual interest rate mortgages, if one payment is missed the interest rate goes through the roof.
Another lender, Paragon Mortgages, (0800 44 00 99), has recently launched Freshstart Mortgage aimed at "victims of the recession". As long as applicants can prove they had a good credit rating before things went wrong, subsequent repossession or court judgements are not an issue, it says. "We want evidence of a good credit history at some point in the past, an understanding of how it all went wrong and a case to support the view that applicants are resolving their financial and personal difficulties," says John Heron, a director. But Paragon will only lend up to 80 per cent of the property price and the Freshstart rate is expensive, 3 per cent over standard variable rates. After three years, however, this 3 per cent premium will often be removed.
John Charcol, a firm of mortgage brokers, usually steers clients towards the Kensington Mortgage Company, which charges a slightly lower rate than Paragon but which stays in place for the life of the mortgage. Kensington expects borrowers to switch to a mainstream lender after a few years when their credit record has improved. Both Paragon and Kensington charge three months' interest if a client goes elsewhere.
Those "victims of the recession" who do approach mainstream lenders are not necessarily wasting their time. A customer deemed low risk by Paragon or Kensington may be just as acceptable to the Bradford & Bingley building society, for example. "We look at each individual case, and if a customer was simply caught up in the events of the early Nineties through no fault of their own, and is now back on his or her financial feet, we would certainly consider lending to them," says James Evans, a spokesman. Nationwide takes the same view. "If, for example, a client has been renting since he lost his property and rent payments are up to date, we would look sympathetically on such a case," it says.
Different lenders will have different policies, however, and if you have a bad credit history, paying for a mortgage broker to trawl the market could be worthwhile.
The Council of Mortgage Lenders (CML) warns that it is unlikely that levels of arrears and repossessions will fall back to the low levels prior to the recession. Michael Coogan of the CML says: "Rising interest rates mean that people coming out of fixed or discounted mortgage deals may face a reasonably large increase in monthly payments. At the same time, the low take-up of private mortgage protection insurance among new borrowers does not augur well if they lose their jobs in the future and need help to meet their mortgage payments. The full consequences will not be felt until a downturn in the wider economy occurs."
Borrowers should note, however, that the mortgage protection insurance offered by lenders is generally expensive.
Home owners on income support (about 400,000) may also face financial difficulties because of the way the Government calculates mortgage help. Where borrowers do qualify for help, and many people will not qualify at all, it is only for the interest element of payments. And interest is calculated by taking the average rate from a number of building societies, which is lower than the market as a whole, the Halifax et al having now become banks.
The net effect is that the rate paid out by the Department of Social Security will in many cases be lower than the rate a borrower is paying.
Liam Neeson's Downton dreams
Thriller is set in the secret world of British espionage
30 August 2014 12:00 AM
05 September 2014 11:30 PM
30 August 2014 12:00 AM
The UK has slipped to 11th in the latest European league table of savers. Rob Griffin checks out the best options
22 August 2014 10:30 PM
Caroline Flint, the shadow energy secretary, says a Labour government would create a new energy regulator
22 August 2014 10:30 PM
16 August 2014 12:00 AM
16 August 2014 12:00 AM
08 August 2014 11:30 PM
- 1 Mario Balotelli: Staff at arson-hit Manchester Dogs' Home convinced Liverpool striker is behind five-figure donation
- 2 Scottish independence live: Scotland gives a clear 'No' in historic referendum - as it happened
- 3 iOS 8 is full of shiny new features - but it's terrible news for app developers
- 4 Friends 20th anniversary: Six things we wouldn't have without influential comedy series
- 5 Scottish independence: Tory revolt against 'devo max' grows as Rail Minister Claire Perry joins
Daniele Watts: Django Unchained actress detained by Los Angeles police after being mistaken for a prostitute
Scottish independence referendum: A nation divided against itself
Scottish independence: David Cameron is becoming the 'George Bush of Britain'
Russia freezes Ukraine into submission: Kiev admits country doesn't have enough fuel for winter
Scottish independence: The Queen breaks silence on referendum debate – as think tank warns of £14bn black hole if Scotland votes Yes
Portuguese academic says British are 'filthy, violent and drunk'
iJobs Money & Business
£400 - £450 Per Day: Clearwater People Solutions Ltd: **URGENT CONTRACT ROLE**...
£320 - £330 per day: Ashdown Group: The Ashdown Group have been engaged by a l...
To £75,000 + Pension + Benefits + Bonus: Saxton Leigh: My client is looking f...
To £85,000 + banking benefits: Saxton Leigh: You will be expected to carry out...
Day In a Page
A new seven-bedroom home built in Queen Anne-style with swimming pool and parkland views in Mortimer
A listed, four-bedroom farmhouse in the rural hamlet of Rushall with detached barn, four acres of gardens and paddocks
A first-floor flat with two bedrooms, a spacious reception room and communal grounds in a leafy part of London
A three-bedroom flat with a spacious rootop terrace and balcony, accessed from a private gated courtyard
A Grade II-listed pile with six bedrooms, stables and 39 acres of grounds in Standlake
A two-bedroom flat with boutique hotel-style interiors, close to the foodie haunt of West End Lane
A two-bedroom flat in a beautiful old vicarage, with many original features, close to the city centre
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley
A five-bedroom B&B and separate owner's accomodation with potential for conversion
Enjoy summer by the Thames in this two double-bedroom converted warehouse in Rotherhithe village
A one-bedroom, luxury apartment with private gym and concierge service in Moorgate
A four-bedroom house in Hermitage Gardens with three reception rooms and landscaped gardens
A seven-bedroom Grade II-listed property with a separate self-contained apartment
A five-bedroom Victorian house with three reception rooms and galleried landing, £695,000
A six-bedroom farmhouse with five acres of land in a former cloth-making village
A secluded seven-bedroom detached house with large private garden, £490,000
A three-bedroom cottage overlooking Sarratt village green with open fires and solid oak floors
A three-bedroom maisonette flat in a Grade I-listed, Georgian townhouse in a sought-after location
A one-bedroom apartment located within a private gated development, north of Turnham Green
Look forward to a brighter future at two-bedroom Sunny Cottages, ideal for Londoners looking to downsize
A three-bedroom red-brick cottage with outbuildings and pretty gardens, £200,000