A new sub-prime lender has launched into the mortgage market aimed at borrowers with an adverse credit record. Magellan Homeloans is the first major sub-prime lender to launch since the crash and a sign that the market is beginning to ease on mortgage criteria.
Tough new mortgage rules on affordability and income checks mean the mortgage market will never be as reckless as it was before the crash.
Instead it is a sign of a recovering housing market that lenders are prepared to take on more risk and help people with damage credit histories.
Whereas the housing market has been simply out of bounds for those with a few credit blips the door is creaking open. Borrowers will still need a clean credit history for 12 months and be able to legitimately explain any past difficulties.
The firm says it will operate a philosophy that understands people have difficult patches and will allow them to get back to financial stability.
The products will only be available at 65 per cent and 75 per cent loan to vales and will take on different levels of credit histories.
The rates are reflective of the much higher risk lenders take on with adverse credit borrowers.
However, the high rate is the privilege for getting a deal with a poor credit history and gives choice where there has previously been very little. Any deal with such high rates needs top quality financial advice and they are only available through qualified mortgage brokers.
Borrowers will be allowed five county court judgments, but not in the last 12 months, up to 70 per cent loan to value..
At 75 per cent loan to value borrowers will need to be free of county court judgments for the last three years.
Deals are available on both purchase and remortgage up to £400,000 with a minimum £25,000 deposit.
Application fees vary depending on property price while completion fees are 1.5 per cent with a minimum rate of £995. There are no early repayment charges.
The range is also open to self-employed borrowers and first-time buyers.
The mortgage squeeze in the last five years has seen lenders operate a vice like grip on their criteria meaning borrowers have faced difficulty. A missed credit card payment three years ago or other minor blip has seen people miss out on their dream home.
There are also those who, during the financial crisis, have hit difficult patches caused by unemployment and arrears. Many can recover from those patches and demonstrated a credible basis fro repaying a mortgage again.
It does not mean reckless borrowing but rather an ability to asses risk and charge according with higher rates.
For many it will be inappropriate and mortgage brokers will be able to let you know but for some it could be the key to a better home.