Adverse mortgages may not benefit the consumer warns Mias
MIAS (the Mortgage and Insurance Advisory Service) is concerned that the boom in the sub-prime – or adverse credit – mortgage market will not necessarily translate into a better deal for consumers.
In the past, the worst excesses of the sub-prime market could be summed up as, ‘the miss-selling of the most expensive and complex mortgages to some of the least affluent and financially-astute people’.
With so many high street lenders moving into this sector, including Alliance & Leicester and new arrivals such as DB Lending funded by Deutsche Bank, MIAS would hope that this would change. However, the old adage that increased competition is always a good thing for customers, because it brings down prices, may not apply in the adverse credit market.
Commenting, Alistair Good, Managing Director of MIAS (http://www.mias-ltd.co.uk ) said: “The increased profit margins of the adverse credit sector must be hugely tempting to high street lenders. But amidst this flurry of product launches, a note of caution must be sounded: Some of these lenders have limited experience of what is an incredibly complicated market.”
With so many lenders with little prior experience moving into this sector, there is a real worry that levels of service could plummet.
Outlining his reservations, Alistair Good said: “This is of particular concern, because lenders’ helpdesks need to know their lending criteria inside-out, to enable mortgage applications to be processed quickly. As it is, lenders frequently misadvise on regular high street deals - adverse credit, or bad credit mortgages (http://www.mias-ltd.co.uk/uk-problem-mortgage.htm ) are far more complicated. If the wrong information is given to the advising broker, it could be catastrophic in situations where mortgage offers must be approved quickly – for example, if a re-mortgage is needed in order to prevent a repossession.”
Commenting, Roger Milbourn, Director of MIAS, said: “MIAS believes that fast processing is often essential for adverse credit mortgages (http://www.mias-ltd.co.uk/adverse-credit-mortgages.htm ), but more importantly these mortgages should only ever be recommended in the first place as a stepping-stone to high street lenders and good credit. Establishing long-term affordability is therefore key; otherwise a vicious circle can easily occur, whereby a customer grappling with high mortgage repayments falls into arrears – which in turn, locks them into further expensive adverse deals in the future.”
Notes to Editor:
The Mortgage and Insurance Advisory Service (MIAS Ltd) is a firm of impartial mortgage advisers, offering a comprehensive service to clients seeking residential and commercial mortgages and mortgage protection.
Founded in 2002, MIAS has quickly gained a reputation for providing straightforward, impartial mortgage advice matching clients up with some of the most competitive deals around. MIAS’s experienced mortgage brokers (http://www.mias-ltd.co.uk ), have expertise in all sectors of the mortgage market and look after the whole transaction from beginning to end, making the process as smooth and as headache-free as possible.
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