Mortgage borrowers who fall into the subprime category could be facing a major increase in the cost of borrowing. A maelstrom in the credit market is affecting the cost of funding, amongst bother lenders and brokers, and the Subprime market has been the hardest hit. A rise in mortgage arrears and home repossessions is a likely effect.
Borrowers who have adverse credit are facing the fallout of the collapse of the US subprime mortgage lending industry. Those lenders who specialise in this field get their funding from the wholesale market, which has been damaged lately. The result is higher rates for borrowers.
Leading lenders Kensington Mortgages and Northern Rock have both adjusted their loans to reflect the changes, by 0.55 and 1.25 per cent respectively. Similarly, the largest subprime lender in the UK, GMAC-RFC has changed rates at the adverse end of the market.
One mortgage expert, Ray Boulger of John Charcol, reportedly commented: "Until either the securitisation market comes back or there are other sources of funding that will allow lenders to offer mortgages at a competitive rate, they will have to tone down the volumes quite sharply."
Climbing rates for subprime mortgage borrowers
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Climbing rates for subprime mortgage borrowers
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