The fallout from the ongoing credit crunch has really hit Peoples Choice hard, pushing them to file for Chapter 11 in the US.
Peoples Choice are one of the many subprime lenders who have been riding the wave of second tier lending, that is to those who are a greater risk than normal, only to find the waves crashing over their heads as defaults and lack of extra funding leave them unable to continue.
The company has filed for Chapter 11 so they can take some time out to reorganise themselves and regain stability. During this time their creditors are kept at bay, thus freeing the organisation up to get their house in order and ideally come out better than before.
One of the biggest problems with subprime lending, and one that Peoples Choice will certainly have seen, is that a lack of affordability leads to lenders offering more and more money as an incentive to use them, with 120 percent mortgages not uncommon. The borrower relishes the extra money but often finds it has gone very quickly, the repayments are higher than they would normally have been and the value of their property does not cover the amount borrowed. A recipe for disaster as soon as house values stop growing at a high rate, which is what has happened in the USA recently.
Abbey National mortgage customers facing difficulties on the back of the credit crunch are being asked to consider taking in lodgers to make ends meet.
Across the country there are currently over 18 million households with an unused bedroom that could be offered out for rent. The average rental price paid for a bedroom in a house is just under GBP290 per month according the Abbey National figures and represents extra money that the homeowner could find very useful.
Anyone considering this option should ensure the terms of the mortgage are not being breached in any way and also that any insurance cover is still valid for the homeowners property. Abbey National expect there to be few problems but ask homeowners to check before going ahead.
The Abbey National Intermediaries Division has just announced that it will be offering some exclusive mortgage deals for a number of selected partners.
The offers being provided by Abbey National vary from a low of 5.76 percent up to 5.81 percent, with at least a 50 percent deposit being needed for all the special mortgage deals available. A spokesman said that more offers like this would be released over time, dependent on the situation in the mortgage market at the time.
The Abbey National spokesman went on to say that this was a clear indication to the intermediary market that they are happy to lend money still and support for this important element of the mortgage market is very important to them.
