Banks relax mortgage loan rules

It's getting easier to buy a home

People who have a poor credit history or are self employed are finding it easier to borrow money to buy a home, market analyst Datamonitor has said.

Banks are increasingly willing to relax their rules because the mainstream market is saturated, Datamonitor said.

In 2004, lending to people with low credit scores grew twice as fast as mainstream mortgage lending.

An estimated £41.2bn was lent to those with poor credit history or the self employed in 2004, up 9.1% from 2003.

Even with a more relaxed approach by banks, some nine million adults are refused loans each year, the group added.

Saturated market

Lending to people who work for themselves or have trouble with credit ratings is set to continue to grow, and not just in the mortgage sector, Datamonitor said.

The increased saturation of mainstream markets, whether credit cards or mortgages, has led to a number of mainstream lenders operating in the non-standard segment Karin Purang, author of the report

The number of credit cards issued to the self employed or those with a poor credit history is set to rise from 9.5m to 13m by 2009, the group forecast.

"The increased saturation of mainstream markets, whether credit cards or mortgages, has led to a number of mainstream lenders operating in the non-standard segment," said Karin Purang, author of the Datamonitor report.

"Consequently, the non-standard sector is set to become very competitive in the near future."

Problems have been emerging, however, and in recent months several High Street banks have warned that levels of bad debt are on the increase.