Bleak prospects for debtors

by Gill Montia

Story link: Bleak prospects for debtors

According to experts in the field of credit, the current shortage of money in the debt markets resulting from the crisis in the US sub-prime mortgage market, is likely to cause a sharp rise in the number of people in the UK denied mortgages, loans and credit cards.

In 2006, seven million UK consumers were turned away by mainstream lenders and analysts already expected this figure to reach 8.6 million by 2011.

Recent events could mean that it will go even higher, as the world’s banks take up the losses incurred in the US crisis, which have been estimated at £50 billion.

The situation in the US, plus pressures from the Financial Services Authority, has caused UK lenders are review their practices to screen out anyone with a poor credit rating.

A number of lenders have already withdrawn their sub-prime mortgage products, as well as mortgages where the applicant’s income is self-certified.

Some lenders have increased the interest rates charged on these loans by as much as 2.5%, adding £150 a month to repayments on a £100,000 mortgage.

In the UK large numbers of people are already struggling with their personal finances as a result of the five increases in the Bank of England base rate in the past year 12 months.

Both home repossessions and County Court judgments are increasing, adding to the number of people with poor credit histories.