Metro Bank launches mortgages for those with low credit scores, missed payments and repossessions

Metro Bank launches ‘near prime’ mortgages for borrowers with low credit scores, missed payments and even repossessions on their record

  • New mortgages will have less strict credit checks than standard home loans 
  • Those who have missed mortgage or loan payments, declared bankruptcy and even had a home repossessed will be eligible under certain circumstances
  • They will need to pay much higher interest rates of up to 4.19%

Metro Bank has launched a new range of mortgages for borrowers with an ‘adverse’ credit history who may struggle to get a home loan elsewhere.

The high street bank will be the only such lender offering near prime mortgages, and said it aimed to service the 14million people in Britain who, according to PWC, have less than a perfect credit history.

The new range will accept borrowers with ‘lower than average’ credit scores, though Metro Bank has not made clear what the exact requirements will be.

Metro Bank’s new mortgage is designed for borrowers with low credit scores 

It will also accept those with unsatisfied county court judgements and defaults, with no need for these to be repaid before the end of the loan term.

Those with satisfied defaults and CCJs will be eligible if the total value over the past three years is less than £1,000, while unsatisfied defaults and CCJs can be up to £1,000 and £500 respectively.

Borrowers who have missed up to two mortgage or secured loan payments in the past two years will be eligible, while utilities or phone bill defaults are not counted towards the application if they amount to less than £1,000.

Those who are on a debt management plan can still apply if the plan was set up more than a year ago, while borrowers who declared bankruptcy more than three years ago are also eligible.

Even those who have had homes repossessed can apply, as long as it happened more than six years ago. 

However, customers with evidence of taking out payday loans or of declined payments will not be accepted. 

Metro Bank will be the only high street bank to offer a near-prime mortgage

Metro Bank will be the only high street bank to offer a near-prime mortgage 

Tony Davis, head of pricing at Metro Bank, said the new mortgages were aimed at borrowers with ‘adverse credit, a lack of credit or no credit score’.

Borrowers will be able to take out mortgages at up to 80 per cent loan-to-value, and the loans will be available for both purchase and remortgage.

The headline interest rates are between 3.79 and 4.19 per cent; substantially higher than average.

For example, those taking out a standard mortgage with an 80 per cent deposit can currently access two-year fixed rates as low as 1.45 per cent.

The maximum loan size will be £500,000, and there will not be an interest-only option.

The mortgages will be available through intermediaries and in branch, and joint borrower, sole proprietor and four-applicant applications will both be accepted.

Charles Morley, director of mortgage distribution at Metro Bank, said: ‘We’re thrilled to offer this latest near prime offering to customers who may have been overlooked by the vast majority of the market.

‘We want to support those customers who are worried they can’t afford a mortgage in the current environment.

‘This is just the start of an exciting journey. We want to offer a wider breadth of mortgage products to support the needs of more customers.’

Metro Bank already has £300m of near-prime mortgages on its books, which it has purchased from other providers.

The bank is increasing its specialist lending offer, which accounted for 80 per cent of mortgage applications made to Metro Bank in the year to Q3 2020.

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