Sales of non-standard mortgages rise

Mortgage lending to people who would previously have had problems borrowing money is growing at twice the rate of the standard market, a report showed today.

Market analyst Datamonitor said strong growth in the sector was attracting large financial institutions and mainstream lenders into what had previous been a niche market.

As a result it said fewer people who were self-employed or who had impaired credit histories were being denied mortgages.

It said during 2004 mainstream mortgage lending had increased by 4.5%, while the non-standard market recorded growth of 9.1%. The total amount borrowed in the non-standard sector reached £41.2bn.

Datamonitor said the entry of big players into the market was also reducing the difference between the mortgages offered by mainstream lenders and those that serve the non-standard sector.

It has also led to greater acceptance of so-called credit repair, under which people with bad credit histories are given the chance to improve their rating.

The author of the report, Karina Purang, said: "The increased saturation of mainstream markets, whether credit cards or mortgages, has led to a number of mainstream lenders operating in the non-standard segment.

"Consequently, the non-standard sector is set to become very competitive in the near future."

Datamonitor estimates that in 2004 there were around 9.1 million people in the UK who were refused credit by mainstream lenders because they were self-employed, had county court judgements (CCJs) against their names, or had taken out agreements with previous creditors after they were unable to manage their debts.

It added that there were around 600,000 fewer people in this position in 2004 than in 1999, as a result of low unemployment and low levels of mortgage arrears.

Datamonitor said saturation of the main market was leading to lenders relaxing their criteria to serve people who would previously have been refused credit.

At the same time major players, such as Barclaycard and Capital One, have started offering credit cards to people who have not had a chance to build up a credit history.

The group said that by the end of 2003 there were 9.5 million credit cards in issue to people who were considered non-standard, the vast majority of whom were self-employed. It said this was set to rise to almost 13 million by 2009.