Up until Covid hit in early 2020 there were 3 good solid Right to Buy mortgage lenders who accepted adverse. These lenders were open to adverse credit such as Defaults, CCJs and Bankruptcy. There were also another 2 lenders who were getting ready to launch Right to Buy mortgages to applicants with Bad credit. This would have really helped the Right to Buy market as it would have brought improvements around criteria specifically for ex Bankrupts and people in Debt Management Plans.
Unfortunately Covid came and changed all of that. The 2 lenders who were looking at entering the Right to Buy market put those plans on ice. Two of the lenders who already had Right to Buy products stopped doing mortgages full stop . They pulled the shutters down overnight. The final lender remained lending, however they pulled their RTB products.
More or less overnight we went from a small but decent offering from lenders who catered for Right to buy with Bad credit to nothing. That then meant we were resigned to the high street lenders. These lenders relied on credit score and quite a narrow scope of adverse that could be accepted. Added to that, because of the uncertainty at the time they also tightened up on criteria and credit scoring.
Right to Buy with Adverse in 2021
This remained all through 2020 and up until late 2021. In the last quarter of 2021 we had 3 lenders who could consider Right to Buy applications with adverse. When I mention adverse, I am talking about adverse that would not pass on the high street.
Right to Buy with Bad credit in 2022
Now that we have a couple of lenders who are dipping their toe in with Right to Buy it looks like it is back on the radar. I have spoken to other bad credit lenders and it seems Right to Buy mortgages is something they are looking at. They seem to think it will open them up to a new market. In turn they think this will allow them to increase their customer base.
The two lenders who have shown signs of entering the Right to Buy market in 2022 I think will help to make some improvements. In particular I think we will see improvements to rates and criteria. The more lenders in a particular part of the market helps to drive competition. This should hopefully mean an improvements to products and rates.
In particular I think we will see more options for people wanting to purchase under the Right to Buy scheme who have Defaults, CCJs and Debt Management Plans. However, I think we will also see rate and product improvements for people who have been Bankrupt or in an IVA.
I think 2022 is looking like it will be a good year for those of you with bad credit wanting to buy your home through Right to Buy.
A few things that I do not think will change to much are:
- Purchases will be limited to 100% of the purchase price and 75% of the property value,
- You will not be able to secure additional borrowing for home improvements,
- Currently you will be limited to 5 year fixed rate products, at least until Spring I think.
These are just my thoughts as I write this at the end of 2021. Please do not hold me to them. If you are looking at this in the new year, please get in touch. We can discuss what products are around at the time. As it has been a very unusual 6-12 months it is difficult to predict the future. I may also write another post on this as things change.