Can I Get a Mortgage With Bad Credit?

Read on as we explore the best 7 bad credit mortgages available for you in the UK.

Updated: May 22, 2024
Matt Crabtree

Written By

Matt Crabtree

|
Rebecca Goodman

Edited By

Rebecca Goodman

CompareBanks is reader-supported. When you click through some links on our site, we may earn an affiliate commission. Learn more

Missed payments can lead to more than just financial arrears. Damage to your credit report and reduced lending opportunities can result, preventing offers from mortgage lenders and personal loan brokers due to bad credit.

However, all is not lost. Some specialist mortgage lenders offer adverse credit mortgages to individuals with a poor credit rating, although a larger deposit is typically required.

In this article, we will present you with the best options for securing a mortgage with bad credit, opening up your options for a brighter financial future.

ProviderScoreDetails
1. Kensington Mortgages★★★★★Click Here
2. Santander★★★★★Click Here
3. Virgin Money★★★★★Click Here
4. First Direct★★★★Click Here
5. Atom Bank★★★★Click Here
6. Yorkshire Building Society★★★★Click Here
7. Halifax★★★★Click Here

What Is a Bad Credit Mortgage?

A bad credit mortgage is a property loan tailored for individuals who have a bad credit history. Perhaps you have defaulted on a credit card or a business loan, negatively impacting your credit file and delivering a bad credit score?

Ordinarily, mortgage lenders would not offer mortgage deals if your credit score is low. However, a mortgage with bad credit is not out of the question!

Bad credit mortgages are offered by some mortgage lenders, providing a property lifeline that high street lenders may reject. 

A bad credit mortgage does come with certain stipulations, however, such as a larger deposit and a higher interest rate to mitigate the higher risk. 

Over time and with consistent on-time monthly repayments, you could see a lower interest rate emerge and your credit score climbs to approval. Such specialist lenders prove that it is still possible to borrow money with bad credit.

What Is a Bad Credit Score?

What figure constitutes a bad credit score will depend on the credit reference agencies you use as they each possess their own thresholds. 

In the UK, the three main credit reference agencies in use are Equifax, Experian and TransUnion. So, what does each credit reference agency deem to be a poor credit score?

Equifax

Equifax has recently adapted its credit score ranges to add a ‘Very Good’ rating and to assess credit scores out of 1000 instead of 700.

Here are the Equifax credit score bands:

Equifax BandCredit Score
Poor0 – 438
Fair439 – 530
Good531 – 670
Very Good671 – 810
Excellent811 – 1,000

To receive poor credit scores, borrowers would fall into the ‘Poor’ or ‘Fair’ categories. Of course, the lower your score, the higher the risk the lender will view your application. A ‘Good’ credit rating under Equifax should surpass 531 points.

Experian

When using Experian, the highest possible credit rating is 999. 

Here are the Experian credit score bands:

Experian BandCredit Score
Poor0 – 560
Fair561 – 720
Good721 – 880
Very Good881 – 960
Excellent961 – 999

To secure a ‘Good’ credit score with Experian, a higher rating of 721 should be achieved. Under these bands, a ‘Poor’ or ‘Fair’ credit score is rated as a score of 720 or lower.

TransUnion

When using TransUnion, the highest possible credit rating is 710. 

Here are the TransUnion credit score bands:

Experian BandCredit Score
Very Poor0 – 550
Poor551 – 565
Fair566 – 603
Good604 – 627
Excellent628 – 710

A ‘Good’ credit score with TransUnion is a rating of 604, with the highest possible ‘Excellent’ rating reaching 710.

A poor credit history could be caused by missing payments for standard credit card or utility bills, building up arrears, receiving County Court Judgements (CCJs), or an Individual Voluntary Arrangement (IVAs). This also includes bankruptcies or if you have been placed on a debt management plan.

How Can I Get a Bad Credit Mortgage?

Bad credit mortgages are typically secured through specialist lenders that cater for borrowers with a low credit rating. However, specialist mortgage brokers are another option that you can access to obtain the latest deals and insider knowledge.

Mortgage brokers search through their database of lenders and bad credit mortgages to find the best mortgage rate options for you. You will be charged a fee for this service, although your mortgage broker could provide you with an invaluable service and the best mortgage rates with bad credit.

Alternatively, you could ask a close family member or friend to be your guarantor, particularly if they have a good credit history. However, the guarantor will be responsible for repaying the debt if you were to default payments so it is a substantial responsibility to ask of someone.

Are Any Government Incentives Available?

The UK Government offers a shared ownership scheme to help first time buyers to get onto the property ladder. 

This scheme allows you to buy a share of a property between a value of 10% to 75% of the property’s market value. You can apply for a mortgage to pay for your share of the property, including a deposit of between 5% and 10% of the value.

You will then pay rent to the ‘landlord’ who owns the remaining portion of the property. However, during the duration of the mortgage, you can purchase additional shares of the property. The amount of rent you pay declines as you buy additional shares.

Are There Different Types of Mortgage? 

When applying for mortgage deals, consider whether you want to secure a repayment mortgage or an interest-only mortgage.

Repayment Mortgage

A repayment mortgage ensures that a portion of your monthly repayment amount is deducted from your outstanding balance. This means that every month, your mortgage loan balance reduces slightly.

For example, if your monthly repayment costs you £1,190.32 each month, £325.89 of this amount could be deducted from your outstanding balance. The remaining amount is interest paid to the lender.

A significant benefit of a repayment mortgage is that you are gradually reducing your mortgage balance. You will need to make additional payments periodically to fully clear your mortgage over time, however, but a repayment mortgage does help you to reduce the debt owed.

Interest-Only Mortgage

An interest-only mortgage is much cheaper to pay every month. You will only pay the amount of interest payable to the lender without the additional amount that is deducted from your outstanding balance when obtaining a repayment mortgage.

Whilst this is cheaper for you and your monthly outgoings, the amount of money you owe the lender never decreases. So, if you bought a property for £250,000 and paid an interest-only mortgage for 20 years, you will still owe £250,000 to the lender at the end of the mortgage.

Some people value an interest-only mortgage in the short term until they can sell the property and make a profit on the sale. However, this strategy only works if the value of your property increases over time.

If the value of your property decreases, you will face negative equity and you will owe more to the lender than what your property is worth. You can still try to sell the property, however, although you will need to pay the lender the difference between what you owe and how much the property was sold for.

Are There Different Types of Interest Rates?

There are different types of interest rate that you could apply for from mortgage lenders:

Fixed Rate Mortgage

A fixed rate mortgage allows you to budget for fixed repayments over a certain period of time. 

You will pay the same interest rate each month for as long as your mortgage deal lasts, which is typically 2, 3, 5 or 10 years. Although, fixed interest rates may be higher than variable interest rates.

So, even if the Bank of England base rate rises, your monthly mortgage repayment will not increase. However, you will also not benefit from lower payments when the Bank of England base rate decreases. You will pay the same amount until the mortgage deal expires.

It is essential to be aware, however, that you cannot pay the outstanding balance of a fixed mortgage without facing an early repayment charge. This is typically 2% of the outstanding balance, but can be as high as 5% or even 7%. So, if you are expecting to move home or sell the property in the short term, a fixed mortgage deal is not recommended.

Variable Rate Mortgage

A variable rate mortgage provides a degree of flexibility to your mortgage. You can sell your home without facing an early repayment charge, a good choice if you need a fresh mortgage deal whilst expecting to sell. 

However, a variable rate mortgage can result in fluctuating monthly repayments as the interest rate charged can increase or decrease accordingly. Although, you could secure a lower interest rate than a fixed deal.

This could result in difficulties repaying the monthly repayments, although the freedom of not being locked in a fixed deal is a significant advantage.

Tracker Rate Mortgage

A tracker rate mortgage follows the base rate from the Bank of England, increasing or decreasing in line with this. However, the lender will also add a fixed percentage fee on top of the base rate figure, typically between 0.5% and 1% interest.

Borrowers using a tracker rate mortgage during 2022 and 2023 have experienced a rising base rate and monthly repayments. 

However, the Bank of England base rate is expected to stay stable for the time being and will decrease during 2024 and 2025, resulting in lower monthly repayments.

At a Glance, Bad Credit Mortgage Pros and Cons

So, what are the pros and cons of securing a bad credit mortgage?

Pros

✔️ Security — Purchasing your own home ensures you have security and a home to call your own.

✔️ Affordability — The cost of a mortgage is spread across many years.

✔️ Flexibility — Some lenders will offer payment holidays and the ability to switch from a repayment mortgage to an interest-only mortgage for a period.

✔️ Support — Some borrowers can access Government support such as the shared ownership scheme.

Cons

❌️ Higher interest rates — If you have a poor credit rating you will most likely pay a higher interest rate to secure a mortgage.

❌️ Product fees — Some lenders will charge considerable product fees.

❌️ Repossession — If you default on your mortgage payments, your property will be repossessed.

❌️ Paying back more — You will pay back more than you have borrowed when taking out a mortgage.

Bad Credit Mortgages — Reviews

If your credit report is showing a less-than-boastful credit history, do not despair. We have found 7 of the best mortgages available in the UK that consider poor credit histories. 

However, it is important to note that your success at securing one of these mortgages will depend on your unique circumstances and the level of risk assessed by the lender.

1. Kensington Mortgages 2-Year Tracker — Best Specialist Lender

Features:

  • Variable rate mortgage
  • Interest is charged at the BoE base rate plus up to 1%
  • Interest rate 6.25%
  • Early repayment charge: 1% of the outstanding balance

Representative example — when borrowing £200,000 for a property worth £300,000 with an interest rate of 6.25%, your monthly repayment will total £1,319.34.

From this £1,319.34 monthly repayment, £1,041.67 is interest and £277.67 is deducted from the money borrowed from the lender. 

After the 2-year mortgage has expired, you will have paid £31,664.16 in monthly repayments, of which £25,000.08 is paid in interest and £6,664.08 will be deducted from the original money borrowed.

Kensington Mortgages is a specialist lender that offers a 2-year tracker mortgage at a variable rate. You will be charged the current Bank of England base rate in addition to a set fixed charge of up to 1%.

At present, the tracker rate mortgage from Kensington Mortgages requires an interest rate of 6.25%. So, when borrowing £200,000 for a property valued at £300,000, you will pay £1,319.34 per month, of which £277.67 is deducted from your outstanding balance.

Fees and charges required by Kensington Mortgages are tailored to your own application and unique circumstances. However, an early repayment charge of 1% of the outstanding balance is typical of this lender.

But, is it wise to go ahead with a variable tracker mortgage in the current economic climate? 

Economic experts are predicting that the Bank of England base rate will not rise any further and will remain stable for the time being before gradually declining. This means that you will not pay a higher amount than the current monthly repayment and you will enjoy lower repayments during the 2-year period.

2. Santander 5-Year Fixed Mortgage — Best Incentive

Features:

  • Product fee: £0
  • Interest rate: 5.69%
  • Follow-on rate: 8.50% variable
  • Obtain a £250 cashback payment
  • Early repayment charge: Up to 5% of the balance plus repay cashback benefit
  • Overpay up to 10% of the balance each year fee free

Representative example — when borrowing £200,000 for a property worth £300,000 with an interest rate of 5.69%, your monthly repayment will total £1,250.97.

From this £1,250.97 monthly repayment, £948.33 is interest and £302.64 is deducted from the money borrowed from the lender. 

After the 5-year mortgage has expired, you will have paid £75,058.20 in monthly repayments, of which £56,899.80 is paid in interest and £18,158.40 will be deducted from the original money borrowed.

Santander’s 5-Year Fixed mortgage can offer an interest rate as low as 5.69% which rises to 8.50% after the 5-year deal. There is no product fee to pay when securing this mortgage, with a £250 cashback available once the mortgage has been finalised.

When borrowing £200,000 for a property valued at £300,000, you will pay £1,250.97 each month with £302.64 deducted from your outstanding balance each month.

As little as a 5% deposit can be placed to secure this mortgage, although this minimum deposit rate will rise in accordance to your own credit history and circumstances.

If you wish to pay back the money borrowed much earlier than expected, you will need to pay back the £250 cashback along with an early repayment fee. The early repayment fee charged is up to 5%, although this declines with every year on the deal.

Every year, you can overpay up to 10% of the outstanding balance without being charged any fees, helping you to reduce your outstanding balance.

3. Virgin Money 5-Year Greener NewBuild Fixed Mortgage — Best for First Time Buyers

Features:

  • Product fee: £995
  • Interest rate: 4.95%
  • Follow-on rate: 9.49% variable
  • Ask for a payment holiday
  • Early repayment charge: 3.5% of the balance

Representative example — when borrowing £200,000 for a property worth £300,000 with an interest rate of 4.95%, your monthly repayment will total £1,163.36.

From this £1,163.36 monthly repayment, £825.00 is interest and £338.36 is deducted from the money borrowed from the lender. 

After the 5-year mortgage has expired, you will have paid £69,801.60 in monthly repayments, of which £49,500.00 is paid in interest and £20,301.60 will be deducted from the original money borrowed.

The Virgin Money 5-Year Greener NewBuild deal is perfect for first time buyers buying energy-efficient new build homes. You can receive a low interest rate of only 4.95%, rising to 9.49% variable after the 5 year deal has expired.

When borrowing £200,000 for a property valued at £300,000, you will pay £1,163.36 each month with £338.36 deducted from your outstanding balance each month.

The product fee charged for this deal is £995, with an early repayment charge of 3.5% of the outstanding balance applicable. However, a significant benefit of this mortgage deal is the ability to ask your lender for a payment holiday. Payment holidays can be sought for 1 month after every 9 consecutive monthly payments, or for 3 months after 27 consecutive monthly repayments.

4. First Direct 2-Year Fixed Fee Saver — Best for Remortgaging

Features:

  • Product fee: £0
  • Interest rate: 5.49%
  • Follow-on rate: 6.99% variable
  • Unlimited overpayments
  • Early repayment charge: Varies

Representative example — when borrowing £200,000 for a property worth £300,000 with an interest rate of 5.49%, your monthly repayment will total £1,226.98.

From this £1,226.98 monthly repayment, £915.00 is interest and £311.98 is deducted from the money borrowed from the lender. 

After the 2-year mortgage has expired, you will have paid £29,447.52 in monthly repayments, of which £21,960.00 is paid in interest and £7,487.52 will be deducted from the original money borrowed.

The First Direct 2-Year Fixed Fee Saver mortgage deal is available with a low interest rate of 5.49%, rising to a low 6.99% after the 2-year period has expired. This mortgage deal is perfect for those who are seeking a remortgage.

When borrowing £200,000 for a property valued at £300,000, you will pay £1,226.98 each month with £311.98 deducted from your outstanding balance each month.

There is a varied early repayment charge payable with this deal, although you can place unlimited overpayments on your account without being charged additional fees.

5. Atom Bank 3-Year Fixed — Best for 3-Year Mortgages

Features:

  • Product fee: £0
  • Loan to value (LTV): 90%
  • Interest rate: 5.84%
  • Follow-on rate: 7.14% variable

Representative example — when borrowing £200,000 for a property worth £300,000 with an interest rate of 5.84%, your monthly repayment will total £1,269.11.

From this £1,269.11 monthly repayment, £973.33 is interest and £295.78 is deducted from the money borrowed from the lender. 

After the 3-year mortgage has expired, you will have paid £45,687.96 in monthly repayments, of which £35,039.88 is paid in interest and £10,648.08 will be deducted from the original money borrowed.

Atom Bank is a specialist lender that prides itself on finding a mortgage for almost any personal circumstances. This 3-year fixed mortgage is a rare find as most lenders will typically offer a 2-year or 5-year mortgage deal. Additionally, you will pay no product fee to secure this mortgage.

You can secure a loan to value term of 90% with this mortgage, requiring a deposit of only 10% of the property value. 

You will pay an interest rate of 5.84% during the 3-year period, requiring a monthly payment of £1,269.11. Each month, £295.78 will be deducted from your outstanding balance. The follow-on interest rate is 7.14%, however, after the 3-year loan term has expired.

6. Yorkshire Building Society 10-Year Fixed — Best for Homemovers

Features:

  • Product fee: £0
  • Loan to value (LTV): 75%
  • Interest rate: 5.59%
  • Early repayment charges: Up to 7%

Representative example — when borrowing £200,000 for a property worth £300,000 with an interest rate of 5.59%, your monthly repayment will total £1,238.95.

From this £1,238.95 monthly repayment, £931.67 is interest and £307.28 is deducted from the money borrowed from the lender. 

After the 10-year mortgage has expired, you will have paid £148,674.00 in monthly repayments, of which £111,800.40 is paid in interest and £36,873.60 will be deducted from the original money borrowed.

Yorkshire Building Society’s 10-Year Fixed deal is a good option for homemovers who want the stability of a long term mortgage. You will pay no product fee to secure this mortgage and you can gain a loan to value term of 75% of the property value.

The interest rate charged for this mortgage loan is 5.59%, requiring a monthly repayment of £1,238.95, of which £307.28 is deducted from your mortgage outstanding balance.

The early repayment charge for this deal must be noted, however, as you will pay a fee of up to 7% of the outstanding balance if you decide to pay the loan in full. You will pay a fee of 7% during the first year which then declines by 0.5% every year of the remaining mortgage.

7. Halifax 2-Year Fixed — Best for Low Fees

Features:

  • Product fee: £0
  • Loan to value (LTV): 75%
  • Interest rate: 5.33%
  • Early repayment charges: Up to 2%

Representative example — when borrowing £200,000 for a property worth £300,000 with an interest rate of 5.33%, your monthly repayment will total £1,207.95.

From this £1,207.95 monthly repayment, £888.33 is interest and £319.62 is deducted from the money borrowed from the lender. 

After the 2-year mortgage has expired, you will have paid £28,990.80 in monthly repayments, of which £21,319.92 is paid in interest and £7,670.88 will be deducted from the original money borrowed.

The Halifax 2-Year Fixed Mortgage offers a good interest rate of 5.33%, resulting in a monthly repayment of £1,207.95 when borrowing £200,000 for a property valued at £300,000. Of this amount, you will pay interest of £888.33 and a sum of £319.62 is deducted from your outstanding balance.

You will pay no product fee to secure this mortgage and you can secure a loan to value term of up to 75%, requiring a 25% deposit.

If you decide to repay this mortgage earlier than planned, however, you will pay an early repayment fee of up to 2% of the mortgage outstanding balance.

Leading Bad Credit Mortgages: The Verdict

Mortgages for bad credit can be a difficult minefield to navigate. However, there are options out there, regardless of your low credit score.

If your adverse credit history is particularly bad, contacting a mortgage broker is the best course of action to take. You will need to pay a fee to the mortgage broker, although the broker will find the best option for your own unique circumstances, tailored to your credit record.

Related Guides:

FAQs

Can a bad credit rating stop me from getting a mortgage?

What is a credit reference agency?

What is the best way to get a bad credit mortgage?

Related Articles

Second Home Mortgage: Comparison, Lenders & Rates
Are you interested in purchasing a second home? If you are looking for financing...
Compare Commercial Mortgages in 2024
Whether you are moving to new premises for business purposes or branching out to...
Best Limited Company Buy-to-Let Mortgages
Are you looking to expand your property portfolio and invest in the housing market?...
How to Remortgage With Bad Credit
Remortgaging is a great way to get a better deal on your current mortgage rate....

Mentioned Banks

About Santander Santander UK is a British bank. Though it is a British company and autonomously managed, it is entirely owned by the Spanish Santander Group. Santander is one...
Learn More
Last updated:  About Atom Bank Atom Bank is a digital-only financial company and ‘challenger bank’ established in Durham in 2014. Challenger banks...
Learn More
About Union Bank Union Bank, or Union Bank of Nigeria, was founded in 1917 as Colonial Bank. Its name was changed to Barclays Bank Dominion, Colonial and Overseas in 1925 after...
Learn More
About First Direct First Direct is a retail bank based in the United Kingdom, headquartered in Leeds. It is a telephone and internet-based bank, with no physical branches, and...
Learn More
About Halifax Formerly known as Halifax Building Society, Halifax is a British bank. It is named after the town in West Yorkshire where it was founded in 1853 as a building...
Learn More
About Founded in 1864 as Huddersfield Building Society, the company grew organically until 1975, when it became part of the largest merger between building societies to date. In 1994...
Learn More