Finance and Credit Professional

Consumers that are currently considering bad credit loans or have their money in a sub-prime mortgage may wish to look at their outgoings, following news that a number of the lenders in the sub-prime sector look set to raise interest rates on some of their products for borrowers with a bad credit history or credit problems.

According to a report from Reuters, market turbulence affecting costs, lenders and borrowers is set to lead to an increase in rates from lenders such as Northern Rock, Kensington and GMAC-RFC. What this means is that those who have sub-prime mortgages may need to re-evaluate their budgets, with potentially more money needed to cover their bad credit loan than was previously required.

Northern Rock, a lender that operates predominantly in the prime market, but also provides sub-prime mortgages on behalf of Lehman Brothers, is expected to raise interest rates on its bad debt products by 1.25 per cent, while Kensington has raised its rates by 0.55 per cent. Northern Rock has acted to make it known that such rises only affect its sub-prime involvement and not any of its prime loan offerings. "This is purely in the sub-prime sector and does not spread to our prime range," a spokesperson for the lender said.

Sub-prime lending accounted for eight per cent of the lending market in the UK in 2006, far less than in the US where it accounted for one fifth of lending in the same period, Reuters notes. Yet lenders such as HBOS and BM Solutions are also ready to lift rates in the sub-prime market, which could cause those consumers who have sub-prime and bad credit products to reassess their financial situation and rethink their spending, saving and repayment habits.

While such specialist lenders are looking to raise rates, UCB Home Loans, a lender that specialises in loans for the self-employed and those with variable incomes, this week dropped the interest on a number of its fixed-rate products.

The lender's two-year, three-year and five-year buy-to-let mortgages have had their rates reduced by 0.25 per cent, 0.35 per cent and 0.4 per cent respectively, UCB has announced, effective from August 23rd. Across its self-certification products, rates for its two-year, three-year and five-year fixed deals were cut by 0.15 per cent, 0.25 per cent and 0.3 per cent respectively.

Keith Astill, managing director at UCB Home Loans, a subsidiary of Nationwide Building Society, was happy to announce the changes, which could allow access to credit for non-traditional borrowers. "We are pleased to offer these competitive reduced rates on our product range, especially as customers can also benefit from our free standard valuation incentive," Mr Astill said.

In July, a report issued by the Financial Services Authority (FSA) raised concerns over a number of firms acting in the bad credit arena, suggesting some firms were failing to adequately assess the ability of customers to repay bad credit loans. The FSA suggested that borrowers in the sub-prime area are "vulnerable" and need proper advice and assessment before a loan is agreed.

About The Author :

Steve Smith writes for 1 Stop Finance Shop, where our visitors have access to all types of finance from payday loans and unsecured tenant loans, to self employed loans for homeowners.

Related News

New Customer Technology at Sears Canada - Rapid MasterCard Approval (CNW Group via Yahoo! Finance)
Sears Canada Inc. and Chase Card Services Canada, a division of JPMorgan Chase & Co , announced that they have introduced a rapid-credit process for the Sears MasterCard card. With proper identification, customers can now apply for the card at any Sears store and, upon approval, begin using their Sears MasterCard card immediately at Sears. ...more

Bad Credit and Home Refinance (Daily Clay County Advocate-Press)
(ARA) - Mortgage rates are at historic lows, and it seems like everyone's jumping on the refinance bandwagon these days. But is it really a good idea for people with bad credit? ...more

Serica Energy Plc ("Serica" or the "Company") - Second quarter 2007 report to shareholders (CNW Group via Yahoo! Finance)
Serica Energy plc today announces its financial results for the three and six months ended 30 June 2007. The results and associated Management Discussion and Analysis are included below and copies are available at www.serica-energy.com and www.sedar.com. ...more

To repair or replace: That is the question (Pioneer Press)
Dear Mary: We will need a new stove soon. On preliminary pricing, it will cost about $1,200 to replace. We've just moved in, and I am not sure when (or whether) we will be remodeling the kitchen. What are your suggestions for a cheap stopgap option? Sears wants $600 to fix the problems with the current oven and advised getting ...more

FEATURE-Credit-score =2 (Reuters via Yahoo! Asia News)
Credit histories, part of the basis of a credit score, require some judgment and training to interpret, and decisions are subjective. ...more