What does Sub-Prime mean?

Steve Weisner - Independent Financial Adviser Radcliffe & Newlands

Sub-prime is a term used to describe loans or mortgages supplied to people with lower credit ratings. These credit ratings are decided from a range of different data about you – from where you live and work, how much you earn and whether you are married through to less obvious things like how often you have moved and your experience in managing previous debts.

There is little standardisation of what exactly constitutes what level of subprime but it can cover a whole range of situations. At the top, some banks consider a house buyer with less than 5% deposit to be sub-prime, or those needing to borrow more than 3.5 times their annual salary. The self employed are usually also an issue – regardless of their wealth – because their income is never guaranteed. At the lower end of the scale, subprime also include borrowers with a history of bad debt management or even county court judgements.

The interest charged on sub-prime lending is higher then for standard lending because the default risk is higher. This varies with each situation but basically the lower the credit rating, the higher the interest rate. However, with interest rates having been so low for so long, sub-prime has become more affordable and demand has consequently grown massively. Unfortunately, this also means the number of defaults has gone up, particularly as recent interest rate rises have begun to bite.

To find out you could reduce your monthly mortgage repayments, please speak to Steve where he'll be happy to help you.

Steve Weisner
Independent Financial Adviser
Radcliffe & Newlands
5th Floor Crystal Gate
28-30 Worship Street
London
EC2A 2AH  

Tel: 020 7382 0437
Fax: 0207 374 0462
Email: SWeisner@myeggnest.com
www.rad-new.com

If you have a question or if you would like to discuss becoming a client with Radcliffe & Newlands then do please complete the very short form on the right hand column of this page.

You will usually get an answer within 24 hours except during the weekend or bank holidays.

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What does Sub-Prime mean?  

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