Lending to Higher Risk Borrowers : Sub Prime Credit and Sustainable Home Ownership

An investigation into the financial products available, and the impact of lending, to borrowers who are not sought by mainstream lenders.

In view of the recent increase in the number of firms seeking to sell financial products to those either with impaired credit ratings (such as people who have CCJs against them, or uncertified income) or those already struggling with debt, this report presents a systematic overview of the financial products available to this market.

Drawing on interviews key players in the market, including lenders and regulators, together with a systematic review of development of the industry as a whole, it summarises the terms and conditions that such financial products offer and documents the penalties that are imposed for default.

This report represents the first attempt to scope the extent and nature of sub prime housing lending.

It considers whether these financial products, such as loans allowing people to consolidate existing debts, help to combat financial exclusion or exacerbate the problem in that they are largely taken up by the poorest and most vulnerable consumers, some of whom may be taking unsustainable borrowing. In particular, it examines whether the products represent good value for money and whether they are jeopardising the longer-term sustainability of owner-occupation, by tying such borrowing against the security of house.