Introduction

Bad Credit Mortgages

Definitive guide to all Mortgages

Mortgages are appropriate for those with any type of credit rating and can be applied for online today.

Mortgage info

Mortgages for People with Adverse Credit

Recent reports from the British Bankers Association confirm that UK mortgage lending for May 2009 reached the lowest level for eight years. This means that, as the banks continue to tighten lending criteria, more consumers are likely to source mortgages elsewhere.

The latest figures from the British Bankers Association show that net mortgage lending in the UK was 2.3 billion pounds in May, compared to 2.5 billion pounds in April. This represents the lowest monthly level for eight years, although overall figures since November 2008 have increased. This monthly decline is attributable to two factors: firstly, the lack of consumer confidence in the housing market, as house values fall and unemployment figures rise; secondly, the banks are still applying stringent criteria when granting credit.

Although mortgages are increasingly difficult for consumers to obtain on the high street, this does pave the way for other lenders who apply more relaxed criteria. The growth of the internet also makes it easier to find other sources. Some credit brokers specialise in different types of bad credit mortgages, and have links to many providers. Several also have handy tools on their websites, such as an online calculator to enable borrowers to assess what the repayments are likely to be, based on the amount of the mortgage, repayment terms, interest rate, and whether the mortgage is repayment or interest only.

It is useful to know the difference between the two when deciding which type of mortgage to take out. With a repayment mortgage the borrower pays an amount off the total loan (capital) each month as well as paying interest. In the early years of the mortgage, the amount paid towards the interest will be substantially higher than that paid off the capital. However, as the repayment term progresses, the proportion of capital repayment will increase.

With an interest only mortgage, the repayments only cover the interest due on the mortgage, so the borrower needs to make other provisions for repayment of the capital at the end of the mortgage term, such as an endowment policy. Many buy-to-let mortgages are on an interest only basis, with the borrower relying on the eventual sale of the property to repay the capital, and monthly income from letting to meet the mortgage payments.

Other options exist under both types of mortgage, for example: fixed interest, where the interest rate is fixed for a set period, or variable interest, where the rate increases or decreases in line with the base lending rate. These are just two of the options currently available and a mortgage provider will be able to explain the different types.

For consumers who have an adverse credit history, or are considered a high risk by the banks for a number of reasons, such as, self-employed, first-time buyers etc, it is useful to know that there are still mortgages available from other providers. Consumers do have to be aware that specialist providers often charge higher rates of interest than the banks. However, with interest rates generally low at the moment, it could be a good time to secure a mortgage with a specialist provider, before interest rates increase again.

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