Bad credit mortgages 'booming'

The market for bad credit mortgages is going through a period of growth in the UK, with expansion of 28 per cent in 2006, according to research.

A study by market analyst Datamonitor reveals that sub-prime mortgages had a value of £24.6 billion in 2006 and could grow to £31.5 billion by 2011.

Bad credit mortgages are taken up by individuals whose poor payment records or history of credit problems has led to them being rejected by mainstream lenders.

According to Datamonitor, the high levels of consumer debt that currently exist in the UK economy support the sub-prime market as more people are being turned away by major providers.

Report author Maya Imberg warned bad credit mortgage lenders of the situation that has occurred in the US, where a high percentage of sub-prime borrowers have been unable to repay their loans, leading to widespread defaulting.

"Despite the argument that they have sophisticated underwriting models in place, UK sub-prime lenders should take the US sub-prime mortgage crisis as a warning and ensure they are not over-exposing themselves to highly risky loans," Ms Imberg said.

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