Debt could prompt more near-prime mortgages

With the Alliance & Leicester expanding into the market with its Premier Mortgage Service, credit reference agency Equifax said it was a sign that there is a growing market of mortgages for people in debt.

Commenting on the decision, Equifax spokesman Neil Munroe said: “It is a reasonable move from a business perspective from the way that debt is accumulating.

“As traditional lenders were tightening their criteria, the near-prime and sub-prime markets could prove ever more attractive and other high street lenders were also likely to start catering for those with a ‘slightly lower credit profile’.”

Sub-prime and near-prime mortgage lenders usually operate under a different name to any bigger parent lender and typically offer higher-rate mortgages to those with bad debt or credit history.

With UK debt totalling over £1 trillion and the amount of insolvencies rising at mammoth rates, this appears to be a burgeoning market for lenders to tap.

However, Equifax warned that these borrowers would be much more affected by economic changes, particularly in the interest rate and warned that people become “very vulnerable” to the economic climate.