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Lenders urged to be inclusive

Lenders should assess and price risk for non-conforming borrowers rather than exclude them, says a new study of the market.

The analysis, carried out by International Institute of Banking and Financial Services director Professor Kevin Keasey, says non-conforming mortgages offer the opportunity to be part of the housing market and can improve borrowers’ credit ratings and provide access to funds through mainstream lending categories.

Keasey warns in his analysis that the traditional response by UK lenders to per- ceived risky lending has been rationing and non-supply of mortgages. He suggests a different response could be not to exclude but to assess the risk and price it accordingly. This option is available in the US but is only available in the UK on a small scale.

The analysis shows 72 per cent of a sample of 1,000 non-conforming borrowers is in the 35-54 age range as people are more likely to go through a divorce, job loss or have health problems at this point in their lives.

Seventy-two per cent of the non-conforming sample fell into social groups C1 and C2, 18 per cent more than in the general mortgage sector.

The analysis found 57 per cent willing to pay an extra 1 to 2 per cent above standard rates to secure a mortgage.

GMAC-RFC executive chairman Stephen Knight says: “Non-conforming borrowers benefit greatly from being able to obtain a mortgage and they have a diverse range of personal and financial backgrounds.”

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