Hometrack, one of the housing industry’s leading sources of market-related intelligence, predicts that: “2008 may just provide the pause for breath the mortgage and housing market really needs.” Gary Styles, the Strategy Risk and Economics Director at Hometrack predicts that “lenders will take stock in 2008 and review and analyse their lending practices and policies to see if they match the long and short term outlook for the market and indeed review their own objectives.”

Hometrack forecasts aggressive competition within the mortgage market that will offer cheap mortgages for borrowers. These cheap mortgages are likely to be targeted at borrowers in the ‘low-risk’ category.

However, since the formation of the Financial Services Association in 2004, those in the ’sub prime’ market need not feel excluded. Perceived wisdom works on the assumption that those with poor or negative credit scores are only eligible for almost-unaffordable mortgages with extortionate interest rates. It also assumes that mortgage brokers will charge them higher fees for the same services offered to clients with positive credit scores. In 2006, the FSA dictated stringent guidelines to make the fees charged by mortgage brokers more transparent, thereby exposing the less scrupulous companies.

Currently, the majority of reputable mortgage brokers do not charge their ’sub-prime’ clients any more for their services than they do their other clients. This has opened the door for many with poor credit scores to take advantage of this important service and source affordable or cheap mortgages.

Some mortgage brokers now dedicate part of their service entirely to those with a poor credit history. Companies, such as The Mortgage Broker Ltd, offer free advice and quotes from the whole of the market, ensuring that every available avenue is pursued in the search for a reasonable mortgage; most people do not realise that mortgage companies are not necessarily the only lenders to approach. Specialist advisors can often provide alternative sources for borrowing or suggest other courses of action to undertake, such as re-mortgaging. There is also the option for ’sub-prime’ clients to switch to a normal repayment mortgage once they have fully rehabilitated their financial situation.

Lenders assess whether an applicant is credit worthy in a number of ways. The first, and most obvious, is the application form itself, which gives details of salary, family size, reason for the loan and whether the applicant is a homeowner.

Secondly, if the applicant has used the lender’s services before, they will take into account their knowledge of any dealings they may have had with each other. Thirdly, they will use files from credit reference agencies: Equifax, Experian or Callcredit. These agencies carry financial data detailing the payments and transactions made by every individual in the UK. Those who have failed to meet repayments, incurred CCJs or have been declared bankrupt will be allocated an adverse score that reflects the potential risk that they offer to lenders.

However, using a mortgage broker who can access mortgage deals from the whole of the market can open up a realm of possibilities for those with bad credit, especially as the brokers can often negotiate mortgage-terms that would seem previously impossible. ‘Whole of Market’ brokers also have no loyalty to particular lenders, so applicants of any credit score can be sure that the advice they offer will be impartial and with the client’s best interests at heart.