Brokers say borrowers should only look to new near-prime lender Magellan Homeloans for a mortgage if they were “desperate”, with its products seen as a last resort.
The lender launched earlier this week with all products priced at Libor plus 8 per cent, regardless of the loan-to-value. It will accept borrowers with adverse credit history as long as they have not had any credit blips within the past 12 months and can explain how any defaults occurred.
Magellan has launched with three loans ranging between 65 per cent and 75 per cent LTV for purchase and remortgaging for debt consolidation, and a further two loans at 70 and 75 per cent LTV for borrowers not wishing to use the loan for debt consolidation purposes. Borrowers are permitted a maximum of five County Court Judgments and bankrupts are allowed at 70 per cent LTV providing the bankruptcy has been discharged in the past 24 months.
Magellan is initially piloting its service via a panel of networks including Sesame, Intrinsic, IN Partnership, Pink Home Loans, First Complete, Homeloan Partnership, Mortgage Advice Bureau and The Whitechurch Network.
Trinity Financial Group product and communications manager Aaron Strutt says: “You would only take these mortgages if you were desperate. We have not had a lender come into the adverse sector for quite a while, so a borrower with no other options may opt for these products. It is worrying that someone could sign up to an 8.55 per cent rate when they could have potentially gone somewhere else and got a better deal.”
Lentune Mortgage Consultancy director Stuart Gregory says: “At this rate, Magellan would not be my first port of call. I would probably go to some of the smaller building societies first.”