According to mortgage broker Moneygate, many homeowners could be redefined as ‘sub-prime’ customers as a crackdown on money lending begins, and this could force serious rises in mortgage repayments.
While a recent comment from Moneyfacts.co.uk outlined the negative impact of the current credit situation on the buy-to-let market, Moneygate is anticipating a broader affect across the mortgage industry.
And even people who previously considered themselves to be unaffected by the US sub-prime debacle could now find themselves in the ‘bad credit’ category.
Director of Moneygate, Dennis Reed, explains the significance of this. “As lenders look to tighten their terms a person could be labelled a bad credit risk and sub-prime just because of a small financial error in their past,” he said.
In the recent ‘credit crunch’ climate, a County Court judgement could be enough to land customers in the sub-prime arena, and customers looking to switch from a fixed-rate deal could find themselves at a distinct disadvantage.
“A mainstream borrower being shunted into the sub-prime market could face crippling interest charges of up to 2.5% higher than average,” said Mr Reed.
Those looking to remortgage are being advised to do this as soon as possible as the credit situation looks unlikely to improve in the near future and borrowing is becoming more difficult across the financial spectrum.
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