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Revealed: the best rates for bad credit mortgages

Discover the mortgage lenders who'll accept bad credit due to a CCJ or bankruptcy

The average interest homeowners pay on a bad credit mortgage deal is a whopping 4.52% – well above the rate for an equivalent deal with no credit impairment.

But while averages give a useful indicator of typical rates, the amount you pay will depend on the provider, the specifics of your credit history and how big a deposit you have.

We’ve analysed all the bad credit mortgages currently available on the market to find the best rates available.

Find out which providers are offering the lowest-rate deals and whether a bad credit mortgage is right for your circumstances.

  • Worried your credit history will prevent you getting a mortgage? Our expert advisers can help you find a lender who’ll say yes – call Which? Mortgage Advisers on 0800 197 8461.

Best bad credit mortgages

To work out which rates are currently available, Which? looked at the 867 mortgage deals currently available to people with ‘impaired credit’, using Moneyfacts data.

As with most mortgage deals, the larger your deposit, the less you’ll pay in interest.

If you’re able to put down as much as 25% – meaning a loan-to-value ratio (LTV) of 75% – you could take out a five-year fixed-rate deal for as little as 1.99% from Metro Bank (APRC 4%).

Best rates at a 75% LTV

Provider Deal type Initial rate APRC Fees
Metro Bank Five-year fixed rate 1.99% 4% £499
Secure Trust Bank Two-year fixed rate 2.44% 5.1% £999
Pepper Money Two-year fixed rate 2.77% 5.1% £1,080

Of course, 25% of a property’s price is a substantial amount of money, especially in expensive markets.

The same three lenders offer the lowest rates for bad credit mortgages with a deposit of 15%.

Best rates at a 85% LTV

Provider Deal type Initial rate APRC Fees
Metro Bank Two-year fixed rate 2.09% 4% £999
Secure Trust Bank Two-year fixed rate 2.94% 5.2% £999
Pepper Money Two-year fixed rate 3.38% 5.7% £1,080

If you have a bad credit score and a deposit of 10% or less, your options are far more limited.

We found that just 19 of the 867 bad credit mortgage deals were available at an LTV of 90% or higher. Once again, Metro Bank and Secure Trust Bank featured among the lowest-rate providers.*

Best rates at a 90% LTV or higher

Provider Deal type Initial rate APRC Fees
Metro Bank Two-year fixed rate 2.29% 4% £999
Secure Trust Bank Two-year fixed rate 4.04% 5.4% £999

*Editor’s note: a previous version of this article stated Marsden Building Society offered a credit impaired mortgage at above 90% LTV. This was based on incorrect information and has now been updated.

Can I buy with arrears or a CCJ?

All the mortgages we considered were available to people with ‘impaired credit’. But the details of your financial situation will also influence whether you’re eligible.

For the deals listed above, these are the conditions you’ll need to meet. Conditions may vary if you’re applying for a different deal or at a different LTV.

Metro Bank: your record can show a County Court Judgment of up to £500 max. You can have a maximum of two mortgage arrears recorded in the past 24 months. Metro Bank will consider applicants with a previous bankruptcy.

Secure Trust Bank: you can’t have any County Court Judgments from the last two years. For mortgage arrears, you can have one from the last 36 months, but none in the past 24 months. Similarly, Secure Trust Bank will not consider applicants with a bankruptcy for these deals.

Pepper Money: this lender won’t accept any CCJs or mortgage arrears from the past 36 months for the deals listed above, and won’t consider applicants with a bankruptcy.

What if I have a bankruptcy on my record?

Buying a property with a bankruptcy on your record can be tricky. Even when looking at mortgage deals specifically designed for people with poor credit histories, just over half aren’t available to anyone with a previous bankruptcy.

Metro Bank and Masthaven are two lenders who will consider applicants with a bankruptcy across all their credit-impaired deals.

Magellan Home Loans will consider applicants who had a bankruptcy discharged more a year ago, though only on certain mortgages.

If your bankruptcy was more than three years ago, you may have options with a wider range of lenders.

However, several providers who otherwise accept credit-impaired mortgage applicants won’t approve anyone with a prior bankruptcy, including Aldermore, Cambridge Building Society, Marsden Building Society, Masthaven Bank, Pepper Money, Precise Mortgages and Vida Home Loans.

How can I improve my credit score?

If you’re hoping to buy a home, it may be worth delaying by a year or two while you work on improving your credit score. Over time, as you build up a history of responsible credit usage and reliable repayments, your score will improve and you may gain access to better mortgage deals.

A recent Which? investigation into credit scoring found that many people don’t sufficiently understand how their actions affect their score.

There are a number of ways you can boost your score, including:

  • Taking out a credit-builder credit card and paying it off in full each month.
  • Avoiding making multiple applications in a short timeframe (being turned down will decrease your score).
  • Using less than 30% of your credit limit each month.
  • Adding your name to the electoral roll.
  • Contacting credit reference agencies to sever old financial associations (for example, with ex-partners or former flatmates).
  • Signing up to make your rent count towards your payment history.
  • Checking your credit report from each agency for errors or mistaken entries.

For more information, read our guide to improving your credit score.

Before you’re approved for a mortgage, you should make sure you’re in a position to keep meeting your repayments, even if your circumstances change or your interest rate goes up. You can use our mortgage repayment calculator to work out how much your monthly payments would be based on different interest rates.


Seek professional advice

The key to getting a mortgage with poor credit is finding an affordable deal with a lender willing to accept your application. A mortgage broker can help you find the right deal for your circumstances.

To request a call back from an expert at Which? Mortgage Advisers, fill in the form below.

 

Your home may be repossessed if you do not keep up repayments on your mortgage.

Which? Limited is an Introducer Appointed Representative of Which? Financial Services Limited, which is authorised and regulated by the Financial Conduct Authority (FRN 527029). Which? Mortgage Advisers and Which? Money Compare are trading names of Which? Financial Services Limited.

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