Metro Bank Launches New Mortgages For Low Credit Borrowers

Metro Bank now offering mortgages with higher rates to those with near-prime credit profiles

Metro Bank

Metro Bank has announced a new range of mortgages for customers who have a poor credit history, although they will be required to pay a higher interest rate.

As things stand they will be the only lender offering ‘near prime’ mortgages, which are those that give customers with an adverse credit history the chance to get a mortgage on a rate that is close to, but not the same as, the current rate for those with a better credit score.

There are around 14 million people in the UK who don’t have a good credit score, although to be eligible to apply they’ll need to meet certain conditions and they will still require a deposit.

Eligibility for new mortgages

The exact terms of acceptance for the new mortgages are yet to be revealed by Metro Bank although they have announced some of the conditions. For many borrowers, their circumstances won’t disqualify them, although some rules will rule out customers.

Customers with unsatisfied defaults on County Court Judgements (CCJs) or defaults on an account could be eligible, even if they don’t repay the debt before the end of the loan term. The maximum limit for unsatisfied CCJs is £500 and for unsatisfied defaults is £1,000.

For satisfied CCJs and defaults within the last three years, the limit is £1,000. Older debts won’t be as much of a concern with the limits unless there are several. Any defaults on utility bills or phone bills won’t be included in the decision, as long as they’re under £1,000. Meanwhile, customers who’ve missed up to two mortgage or secured loan payments could still be eligible.

Anyone on a debt management plan can apply, providing the plan was set up at least a year ago. Bankruptcies that are more than three years old will also still potentially be permissible under the conditions. And even if a customer has had a home repossessed, if it was more than six years ago then the application will be considered.

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    The two major barriers to applications will be customers who have taken out payday loans, or those with declined payments.

    The mortgage details

    Borrowers who are eligible for these mortgages will be able to borrow up to 80 per cent loan-to-value, with interest rates between 3.79 and 4.19 per cent. This compares to around 1.45 per cent for borrowers with other banks who have no credit history problems.

    The maximum size of the mortgages will be £500,000 and they are available both for purchase and for remortgage deals.

    We’re thrilled to offer this latest near prime offering to customers who may have been overlooked by the vast majority of the market.

    We want to support those customers who are worried they can’t afford a mortgage in the current environment.

    This is just the start of an exciting journey. We want to offer a wider breadth of mortgage products to support the needs of more customers.

    Charles Morley, director of mortgage distribution at Metro Bank