Helping borrowers with credit record problems

Gary Brash
Gary Brash

GARY Brash, mortgage and protection adviser from Mortgage Advice Bureau comments on recent developments in the mortgage market:

What a week it’s been with a series of firsts for the mortgage market.

New Governor of the Bank of England Mark Carney signalled interest rates, which often dictate mortgage rates, will only move up when a series of conditions are met. Those include unemployment hitting 7% and a fall in inflation, neither of which are likely to happen for three years. This offers more certainty than ever before to mortgage borrowers and the market, although savers have less to celebrate.

On Monday, a new mortgage lender Magellan, named after the pioneering Portuguese explorer, launched in England and Wales with high hopes of ‘rehabilitating’ borrowers with a credit record blip. This is good news for those who have been stuck on poor mortgage deals after a mortgage application refusal from a high street lender, for example. But importantly the mortgage is only for people who after a one-off life event like redundancy, for example, can offer a full written explanation of how they got into payment difficulties in the first place.

The lender also wants applicants to satisfy strict criteria and will turn down any borrowers with serial credit problems. Applicants must also be 25 or over, earn at least £25,000 and have maintained a clean record for the last 12 months.

Unusually, the lender won’t be credit scoring mortgage applicants either and instead plans to look at each application individually. Borrowers will pay a fee on a sliding scale reflecting the property value and a 1.5% completion fee or a minimum of £995, but there’ s no early repayment charge on the loan giving borrowers the option to pay the loan off early.

Mortgage Advice Bureau is one of the few mortgage brokers able to offer the mortgage to those with a minimum deposit of 25% who want to borrow up to £400,000. The lender is also willing to consider self-employed applicants and first time buyers which is another welcome move.

Magellan’s CEO Matt Gilmour, said: “In our opinion, a short-term financial wobble should not preclude borrowers from mortgage finance on a long-term basis. We’re delighted to be piloting a new proposition which gives credit impaired borrowers a real chance to obtain mortgage funding once again.”

Elsewhere in the housing market, property prices reportedly reached new highs in July. Driven on by prices in the Capital and schemes like the government’s Help to Buy, the average house price hit £232,969.