September 26, 2007

Evidence of mis-selling emerges

As if the problems with the sub prime loans market in the US were not enough, it is now emerging that there has been some serious problems related to the UK sub prime market.

It appears that potential new borrowers are being told to inflate their incomes in order to secure a more substantial loan. This is a very serious situation for both the person taking out the loan and the finance market as a whole.

Around 50% of the UK’s sub prime market is made with those applicants who use the self certification method. These are loans that are given to borrowers who have no accounts or regular wage slips in order to verify their income. Some of the applicants are being advised by brokers to increase their incomes, this will then ensure that they get the loan and the broker gets their commission.

Should these borrowers find themselves in a situation where they are unable to keep up the repayments, then the market could collapse as it did in the States.

Source [Business Scotsman]