Mortgage Holders with Adverse Credit Histories may not be as risky as first thought
New Research shows that the stereotypical view of high risk borrowers may be wrong
GMAC-RFC sponsored research, conducted by NOP, was launched today in the first major public policy analysis into the non-conforming mortgage market – (those with adverse credit history or have been refused a mortgage by a high street lender) entitled "Non-Conforming Mortgages in the UK: A Consumer Perspective". The report includes key independent analysis by Professor Kevin Keasey, Director of the International Institute of Banking and Financial Services, Leeds University Business School. The report explodes myths about the typical non-conforming borrower and also demonstrates the rehabilitative effect obtaining a mortgage has on borrowers. The rehabilitation of non-conforming borrowers As the 12th largest lender and number one non-conforming lender in the UK, GMAC-RFC sponsored this independent research to gain a better understanding of the market and provide policy makers with market-led intelligence on this growing and important sector. One of the key findings of the research was the rehabilitative nature of mortgages on non-conforming borrowers. Key findings included: - One in three (30%) agreed that their credit rating has improved since they took out their last mortgage.
- Nearly half (42%) of non-conforming borrowers believe that their quality of life would be worse if they had been unable to buy their property.
- If the non conforming borrowers questioned had been unable to secure a mortgage, a quarter (27%) would have had to continue renting and a fifth (19%) would have had to move in with family or friends.
- Half (51%) believe that non-conforming mortgages provide the opportunity to improve credit ratings over time.
- Over half (57%) are perfectly willing to pay an extra 1% to 2% above the standard mortgage rates to secure a mortgage showing that they can clearly see the advantages securing this mortgage brings.
Kevin Keasey, Director of the International Institute of Banking and Financial Services (IIBFS), Leeds University Business School, commented: "Our analysis concludes that non-conforming mortgages have a significant and important role to play in the UK housing market. It is clear that the response of some lenders, to simply exclude potential borrowers who do not fit a strict criteria, can have a negative affect, particularly considering the perceived importance of owning a home in the UK. The positive response is to assess individual situations and price mortgages accordingly." Understanding non-conforming borrowers The findings also disprove the stereotypical image of a non-conforming borrower. They are actually far more financially literate than they are often portrayed. Key findings included: - All types of borrowers are involved in the non-conforming market. The mean income of the non-conforming group is higher than the UK national average.
- Two thirds (67%) fully understand why lenders charge higher rates to borrowers with poor credit histories.
- Property values of non-conforming borrowers are only marginally lower than the national average (£138,00 as opposed to £162,000).
- More than one in ten (15%) of non-conforming borrowers are in the higher social classes A & B and there is no heavy bias towards unskilled employment.
Stephen Knight, Executive Chairman of GMAC-RFC, commented: "GMAC-RFC has been the number one non-conforming lender for a number of years. We maintain this position because of our understanding of the non-conforming market. This independent research, which is a contribution to the public policy debate on these important issues, shows that non-conforming borrowers benefit greatly from being able to obtain a mortgage and that they have a diverse range of personal and financial backgrounds." A copy of the full research entitled "Non-Conforming Mortgages in the UK: A Consumer Perspective" can be downloaded from the GMAC-RFC website at www.gmacrfc.co.uk Financial News Feeds provided by OneCompare.com
Date published: 11/19/2004 11:48:19 AM
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