Adverse credit mortgages can help borrowers rehabilitate finances

Adverse lending, or lending to those with previous credit problems, can help borrowers to rehabilitate their finances after a period of financial difficulty, a new report claims.

The study from the Council of Mortgage Lenders (CML) concluded that despite arrears and possessions being higher in the adverse lending sector, it could be a help for some borrowers experiencing short-term money problems.

Adverse credit lending accounts for over five per cent of total mortgage lending, with nearly half of it to people in the less serious or 'low adverse' category.

Less than a quarter of it is to borrowers rated as high risk, in the 'high adverse' category.

Around two-thirds of adverse credit mortgages are remortgages, CML figures show, with remortgagers with previous credit problems more likely to borrow more than their previous mortgage in order to consolidate debts.

The report's author, CML head of research Bob Pannell, said that although the adverse credit mortgage market was higher risk, the organisation believed that it played a valuable part in helping many individuals with short-term credit difficulties to rehabilitate their finances and migrate back to prime products