Sub Prime Mortgages in the UK

The definition of sub prime mortgages is open to interpretation. However, sub prime means that the borrower has at least some degree of bad credit history. Sub prime mortgages are also known as adverse credit mortgages.

The quantity of sub prime mortgages has been increasing in the UK. This includes people who have near prime mortgages. This is a term used for those who have minor credit blemishes; For example missing one or two debt payments. The market for sub prime mortgages has been incresing in recent years. Figures from HBOS suggest the market will hit £29 billion in 2008, from £10 billion in 2004. Increasingly main stream lenders such as Alliance & Leicester and Northern Rock are offering adverse credit mortgages, through third party lenders who specialise in the sub prime market.

Another reason for the increase in the sub prime market is the increasing number of people who have an adverse credit report. Banks are realising that the sub prime market is not necessarily a danger; especially if the borrowers have high income and only one or two missed payments.

However, there are concerns that rising interest rates will cause increased problems in the sub prime market. Sub prime mortgages are more liable to default and repossession. There are fears that what happened in the US could happen in the UK.