Sub-prime lending ‘set to increase’

The market analyst company suggests that the increasing financial pressures on consumers looking to clear debt will drive the growth in the industry, which the Financial Services Authority (FSA) said last week showed “weaknesses in responsible lending practices”.

Datamonitor forecasts that the rising cost of borrowing in the UK will force more and more consumers to seek out mortgages from sub-prime sources and its report makes clear that lenders in the sector should ensure that their customers are not taking on an unmanageable financial burden.

A statement from the research company read: “High levels of consumer debt coupled with a more difficult economic environment will drive the sub-prime mortgage market forward over the next five years.

“With more defaulting or meeting payments late, more consumers will fall into the sub-prime population.”

The FSA said it was “very concerned” by its own findings relating to the sub-prime mortgage sector and warned that many indebted consumers borrowing from these lenders could be risking debt management disaster.