No time to stand still

While the US market crisis continues to dominate the headlines, with a former Secretary to the Treasury in America admitting that the US market could be heading towards a recession, lenders in the UK have also continued to adjust and re-adjust their offerings as a result of the global credit crunch. In the last few days, Kensington and Platform, among others, have realigned their non-conforming ranges, leading to a number of commentators discussing the implications for the heavy adverse end of the market. While in previous years, the heavy adverse market has sought to help those with severe financial situations, be it large levels of debt or those coming back from bankruptcy, lenders have had to rein in their product offerings, with the heavy adverse ranges some of the first to be disbanded, or heavily adjusted.

Ever since the introduction of heavy adverse into the mortgage market, some have argued against its existence, with the claim that ‘if they can’t afford it, they shouldn’t have it’. But in the economic climate that has dominated the UK over recent years, with the ‘spend now, save later’ attitude, more people have turned to the non-conforming sector. While a number of lenders took the decision to dip into this market following a buoyant 12 months, for some this decision has backfired. Lenders were warned that entering into the near-prime markets would not be a way to earn a quick buck and the credit woes affecting the US, and to a lesser degree the UK, highlight the changing conditions of the market.

While the market will recover, with the Council of Mortgage Lenders still expecting borrowing by the end of 2007 to reach £360 billion, the non-conforming dip serves as a timely reminder that circumstances can change, and that lenders, brokers and borrowers should factor in such changes as much as possible.