Possibility of number of repossessions soaring
Some experts are warning that the number of repossessions will soar this year as lenders begin to crack down on sub-prime mortgages by pushing up interest rates and cutting down on how easy it is to secure a loan.
There are hundreds of thousands of homeowners with poor credit histories and it is predicted that as many as 250,000 of them are at risk of losing their home as the impact of the crisis to hit Northern Rock and the global credit crunch begin to impact on banks who are now forced to impose new restrictions on the lending criteria.
Most lenders are afraid of taking too much risk and are pushing up rates as well as refusing loans to customers who have the worst credit problems. This means that thousands of home owners could find themselves in a situation where they can no longer afford their mortgages as the fixed rate deals that they have taken out come to the end of their terms.
Currently the sub-prime sector represents roughly 9% of mortgages in the UK or 1m of the 11.7m mortgages out there. The sub-prime sector was originally a sector dominated by self-employed borrowers but it has grown rapidly over the years as lenders targeted people who would not usually qualify for a conventional loan. This has resulted in the situation we are in today leaving many sub-prime borrowers not exposed to the risks of the financial system.