UK sub-prime market beginning to squeeze

People with bad credit ratings can expect to find it increasingly difficult to secure home loans, as seven UK sub-prime lenders have announced they are either raising their interest rates or withdrawing their mortgages altogether.

"We are not offering any mortgages at the moment," managing director of Victoria Mortgages, Alex Forrester, told the BBC.

"We hope to do it at the end of the month," he added.

Other lenders changing their policies are GMAC-RFC, Unity Homeloans, Infinity Mortgages, Mortgages plc, Preferred and DB Mortgages.

Sub-prime mortgages are targeted at people who cannot secure a loan from a major lender, typically because of a history of debts or uncertain and variable incomes. They account for about ten per cent of all home loans in the UK.

The tightening of lending conditions for poor credit mortgages follows a liquidity crunch in US financial markets, which last week saw panic selling of portfolios exposed to sub-prime mortgages.

A slowing housing market and a surge in mortgage defaults on that side of the Atlantic prompted the market jitters.

And as signs of a similar slowdown in UK property become more apparent, the squeeze on bad credit mortgages is expected to get ever tighter.

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