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High interest mortgages offered to borrowers with bad credit history

Homeowners with bad credit histories will be able to get mortgages of up to £400,000 at interest rates starting at 8.55%, thanks to an offer from new company Magellan Homeloans

Borrowers who have had county court judgements and bankruptcy orders against them will now be able to secure mortgages from Magellan Homeloans.

The company has been set up by Matt Gilmour, who jointly ran sub-prime lender Unity Homeloans with South African Bank Investec, which was one of the first banks to dissolve as a result of the financial crisis in 2009.

Gilmour told the trade magazine Mortgage Solutions that Magellan Homeloans was “opening-up a new route to home ownership by making mortgages available to borrowers who can demonstrate they have regained control of their financial affairs”.

“We understand people hit difficult patches which can lead to financial problems,” he said. “What’s important to us is the applicant’s ability to explain their difficulties and demonstrate how they have been able to restore financial stability so they can now afford a mortgage,” he added.

Gilmour said a “short-term financial wobble” should not mean that lenders would never be able to secure a mortgage. The offer is open to anyone over the age of 25 who has retained a clean credit record for the last 12 months and has a minimum income of 25%.

Borrowers will have to provide an adverse credit explanation (ACE) and the lender says the mortgages will be “rigorously stress tested”.

The new plan has come about just a week after the Chancellor George Osborne announced plans for the second stage of the Government’s Help to Buy scheme, which will guarantee mortgages for borrowers who can afford as little as 5% of the deposit.

By Tom Allsop

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