Many sub-prime borrowers are turning to brokers
May 12, 2008
A recent report has shown that many sub-prime borrowers, such as those with poor credit and those without any proof of income, are now turning to brokers in order to get their loans and mortgages, as many think that they will be unable to find finance on their own in the current financial climate. Whilst it is true that lenders in all sectors have tightened up on their lending criteria, and that sub-prime consumers are one of the worst affected groups, there are concerns that some borrowers are not even bother to look for themselves and are going straight to brokers in the hope that they will find them the best deal.
Some sub-prime borrowers that are going through brokers may already have been turned down, but others may not even have bothered looking, assuming that they will not be able to get finance on their own without the help of a broker. Officials from the Financial Services Authority have expressed concern that the reluctance of sub-prime consumers to shop around and their tendency to go to brokers means that they may not be making an informed choice.
The FSA said that those in the sub-prime market often tended to prioritise on short term affordability and availability rather than looking at the bigger picture. A recent survey showed that many sub-prime consumers were certain that brokers would not recommend an inappropriate product and would find the best deal – most do not bother double checking what the broker says and simply go along with the recommendation.
In addition to assuming that the broker would find them the best deal on their loan or mortgage, many sub-prime customers were also relying on the information that brokers were providing with regards to the risks of taking on finance.
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