Fresh options for those in a web of bad debt

The internet is making life easier for people with problems getting a mortgage from a traditional high street lender. More than eight million people - one in four of the adult population - have had difficulty obtaining credit from high street banks and other lenders, according to estimates.

This may be because they have had debt problems or have county court judgments registered against them. Some may have been living overseas and so have not built up a credit history in the UK.

Until fairly recently, mortgage information on the internet aimed at so-called "non-status" borrowers has been fairly scanty. But now several mortgage companies are expanding their coverage of this sector.

Some internet sites allow people to input their details and find out which products might be appropriate for them, or even check their "credit score".

Using the net may also suit those borrowers who would feel uncomfortable sitting down face-to-face with a financial adviser and talking about problems they have suffered in the past, says Anthony Webb at online firm Independent Mortgage Brokers (www.mortgage-brokers.co.uk). The net allows people to browse the different deals available from the privacy of their home and apply online.

Kensington Mortgage Company, which claims to be the UK's largest lender serving borrowers "who don't fit the mould," recently moved on to the internet.

Its site (www.kmc.co.uk) carries details of almost 20 loans. Its standard variable rate is 6.95% but there is a loading of between 2% and 4.5% depending on the type of loan and the amount of adverse credit the borrower has racked up, giving a current payment rate ranging from 8.95% up to 11.45%.

Another big name in this field is Paragon Mortgages. At its website (www.paragon-mortgages.co.uk) potential borrowers can type in their basic details to find out quickly if the company would be prepared to lend to them.

While some of the mortgages in this sector can be pricey, Paragon's Freshstart loan is one of the better value offerings on the market. It is available both to people buying a new property and those looking to remortgage.

However, it is aimed at those who have experienced "an isolated period of adverse credit", rather than those with a long history of debt problems.

Freshstart is priced at Paragon's standard variable mortgage rate (currently 7.35%), and there is a 1% loading for the first three years which is then removed "provided the account is well-conducted during that time". Ray Boulger at mortgage broker John Charcol says that for those who qualify for it, Freshstart can offer good value. The loading is "quite modest" and there is a guarantee that you will revert to the standard rate after three years as long as there have been no problems, he adds.

John Charcol recently launched its own online mortgage website (www.charcolonline.co.uk), where borrowers can browse through a range of deals. It carries details of a few impaired credit loans already, with more due to be added in the coming weeks.

One of the few high street names in this market is Bristol & West, which offers three "Re-Start" mortgages aimed at borrowers at the lower end of the credit impaired spectrum able to stump up a deposit of at least 25%.

It will lend to those with any number of county court judgments, provided they do not exceed £10,000 in total, and to discharged bankrupts.

From Monday it is offering a deal where you pay 0.6% on top of the standard variable rate (currently 7.24%) for one year, after which you go on to the bank's standard rate.

For full details go to (www.bristol-west.co.uk). Online application is not yet available but borrowers can register to join its e-mailing service.

It's vital to shop around when looking for a mortgage, and this applies particularly to people with credit history problems. Just because one high street bank has rejected you, this doesn't mean they all will. For example, if you have two county court judgments registered against you but neither is very big and both have been settled, you may well be able to get a mortgage from a mainstream lender, says Ray Boulger.