Borrowers Offered Incentives To Switch Mortgages
Edeus, a sub-prime lender of the last couple of years, is clearing its mortgage book and moving into different financial areas. To cut its losses it is offering borrowers incentives to redeem their mortgages early.
Edeus, the former specialist mortgage lender is encouraging its borrowers to redeem their mortgages early, and is offering incentives for them to do so.
For an unspecified period, selected clients will be invited to redeem their mortgages, and early repayment charges and exits fees will not apply. The borrowers will be urged to contact the brokers through whom the loan was originally taken out with Edeus so that a new deal can be negotiated.
Managing director Alan Clearly said that if Edeus were to sell its mortgage book to another lender, it would probably make a loss, and that by going direct to customers it can cut those losses.
Former chiefs at Birmingham Midshires, HBOS’s specialist lending arm, launched Edeus less than two years ago as a specialist lender in the UK’s sub-prime mortgage sector. Of course, this sector has suffered badly in the last 12 months since the credit crunch took hold. A few months ago, however, Edeus announced that it was changing tack, moving into debt management and asset quality assessment. The loss of another provider will be another blow to the sub-prime sector, but Edeus have taken the view that there is not enough of a market in the UK for companies doing what Edeus was doing.
The sub-prime sector was booming prior to the crisis in the US, which led to the credit crunch. Sub-prime borrowers usually have a bad credit history. The Council of Mortgage Lenders reckoned sub-prime made up nearly 7% of home loans in 2007. Now, however, lenders have turned their back on sub-prime borrowers as they are regarded as too high a risk. Sub-prime borrowers have been left high and dry, either with no chance of a mortgage, or on high standard variable rates.
In the mean time, with mortgages difficult to come by, the housing market shows no signs of picking up. Eight months of house price falls now leave houses 6.3% lower in value than at the beginning of 2008.
