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12 Jun 2019

Bad credit mortgages: best rates for borrowers with CCJs, IVAs and bankruptcies

1,500 deals are available to borrowers with less-than-perfect credit histories

If you've had a credit problem in the past, you might be worried that you'll never be able to get on to the property ladder.

This isn't necessarily the case, however, with many providers offering deals for people with histories of County Court Judgments (CCJs), individual voluntary agreement (IVAs) and bankruptcies.

Here, we explain the criteria you'll need to meet to apply for these products and outline the cheapest rates currently available.

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Bad credit mortgages: how many deals are available?

Of the 5,539 mortgages currently on the market, 1,552 are available to borrowers with credit issues - that's about 28% of deals.

The vast majority of these products (86%) are fixed-rate mortgages, most commonly with two or five-year introductory terms.

There are mortgages available to borrowers with a range of deposit sizes, although first-time buyers with small deposits have much less choice, with only 11% of deals available at 90% or 95% loan-to-value.

Getting a mortgage after a CCJ

County Court Judgments (CCJs) are issued if you fail to pay money that you owe and all reasonable avenues - such as late payment letters and default notices - have been unsuccessful.

Right now, 1,442 mortgages are available to borrowers who have a CCJ on their credit record, but many come with strict eligibility rules.

Perhaps unsurprisingly, the better rates are only available to borrowers who have been free of CCJs for at least a year.

For those with worse debt problems, it is possible to get a mortgage with as many as four CCJs, although these products come with much higher rates.

Best two-year fixed rates on CCJ mortgages

The best introductory rates at 60%, 75% and 90% LTV are all from Yorkshire Building Society.

To access these rates, you'll need to be free of CCJs for a year, having previously had no more than two CCJs, up to a maximum value of £500.

One word of caution, however. These products come with significant upfront fees of £1,495, which may override the savings made from obtaining a low introductory rate.

LTVLenderInitial rateRevert rateAPRCFeesRules
60%Yorkshire Building Society1.54%4.25%4.2%£1,495Up to two CCJs (max £500), none in last year
75%Yorkshire Building Society1.57%4.25%4.2%£1,495Up to two CCJs (max £500), none in last year
90%Yorkshire Building Society1.79%4.25%4.2%£1,495Up to two CCJs (max £500), none in last year

Source: Moneyfacts, 10 June 2019.

Mortgages after an IVA

An individual voluntary agreement (IVA) is a contract between someone in debt and the company they owe the money to. It can sometimes be used to prevent bankruptcy proceedings.

Under an IVA, the companies will freeze interest and - in some cases - reducing the amount a borrower owes to a more affordable level. While helping you climb out of a financial hole, an IVA can have a negative effect on your credit score.

Currently, there are 493 mortgages available to borrowers who have had IVAs, although in almost all cases you'll need to have finished the IVA and settled your debt.

As with CCJs, the more time that has passed, the more mortgage options you'll have, as shown in the chart below.

Best two-year fixed rates

The cheapest introductory rates currently available for borrowers with IVAs require you to have settled your plan at least three or four years ago.

LTVLenderInitial rateRevert rateAPRCFeesRules
60%Skipton Building Society1.55%3.99%/4.99% (after five years)4.2%£995Satisfied for at least four years
75%Skipton Building Society1.65%3.99%/4.99% (after five years)4.3%£995Satisfied for at least four years
90%Accord Mortgages2%4.25%4.2%£995Satisfied for at least three years

Source: Moneyfacts, 10 June 2019.

Mortgages after bankruptcy

Bankruptcy proceedings involve your assets being sold off to repay your debts.

It's not possible to obtain a mortgage until you're discharged from the bankruptcy, which usually happens after 12 months (although this can vary).

Of the 542 mortgages available to people who've been declared bankrupt, the vast majority require you to have been discharged for at least three years.

Currently, the only lender who offers deals with a shorter period is MBS Lending, which allows applications from borrowers who've been discharged for a year. As you might imagine, however, the rates are very high.

Best two-year fixed rates

The best deals for borrowers who have been bankrupt are the same products as those offered to borrowers with satisfied IVAs.

As you can see, you'll need to have been discharged from a bankruptcy for at least three or four years to get a good deal.

LTVLenderInitial rateRevert rateAPRCFeesRules
60%Skipton Building Society1.55%3.99%/4.99% (after five years)4.2%£995Discharged for at least four years
75%Skipton Building Society1.65%3.99%/4.99% (after five years)4.3%£995Discharged for at least four years
90%Accord Mortgages2%4.25%4.2%£995Discharged for at least three years

Source: Moneyfacts, 10 June 2019.

Do the biggest banks offer bad credit mortgages?

While the above rates provide a guide to what you might pay, but they might not tell the whole story.

That's because not all lenders are upfront about the circumstances in which they will accept applications from people with bad credit.

This is especially the case with some of the biggest banks, who don't necessarily advertise whether you can get a deal with a history of less-than-perfect credit.

When Which? approached 19 high street lenders about their policies on bad credit last year, only 10 were willing to divulge details, and some of these said they deal with applications on a case-by-case basis.

How to get a mortgage with bad credit

Bad credit might set you back, but it doesn't need to be a life sentence. If you've missed bill payments in the past, there are steps you can take to make yourself more attractive to mortgage lenders.

First of all, banks will want to see evidence that you've been consistently been meeting all your repayments on time since your financial issues were resolved. Some unpaid bills will count more heavily against your application than others - lenders may be more likely to overlook a late mobile bill than a missed mortgage payment.

It's also important that you take some steps to strengthenyour credit score - such as ensuring you are on the electoral roll, limiting credit applications before applying for a mortgage and minimising the amount of credit you're using. We explain more in our guide to improving your credit score.