Atom bank has increased the maximum loan-to-value (LTV) available on its Near Prime range to 95%.
The expansion of Atom bank’s range to cover smaller deposits is in direct response to broker feedback, and a move which will increase borrowing options for those who fall outside of mainstream lending criteria.
The 95% Near Prime range is designed to support borrowers with light adverse credit history or thin files. The 95% products are available to those who have had no defaults in the last 12 months, and no more than one in the last 36 months. The unsatisfied default value must be less than £500.
Other criteria include no CCJs in the last 36 months, and no more than one in the last 37 to 72 months, with a value of no more than £500 for unsatisfied CCJs. There must also be no mortgage arrears in the last 12 months, with no more than two months of mortgage arrears in the last 13-24 months.
Rates for the new 95% LTV Near Prime products start at 6.59% for a two-year fixed rate, with an arrangement fee of £1,995.
Alongside the launch, Atom bank has also reduced rates on its existing Near Prime range, spanning 60-90% LTV, by 0.10%. As a result, rates start at 5.29%.
Meeting Near Prime demand
Atom bank’s Near Prime Index, a biannual report into the state of the Near Prime market, has repeatedly identified the need for more options for borrowers with only modest deposits. The latest edition found more than a third (36%) of brokers felt that deposit size was the biggest barrier to submitting an application for their Near Prime clients.
Raising a deposit of 10% or more has become increasingly difficult in recent years, with house price inflation outpacing wage growth and the increasing cost of living hampering the ability for many people to set aside larger sums.
The thin credit file problem
The most recent edition of the Near Prime Index looked in-depth at first-time buyers, and the issues they face accessing the housing ladder if they do not meet Prime criteria.
The challenge of ‘thin’ credit files, where borrowers are hampered by a lack of credit history rather than previous payment issues, was highlighted as a particular challenge for first-time buyers by more than a quarter (27%) of brokers. Previous studies from Experian have suggested there are as many as five million people in the UK who are essentially ‘invisible’ to the credit system as a result of a lack of financial data, potentially excluding them from Prime finance.
Richard Harrison, Head of Mortgages at Atom bank, explained:
“Brokers have been calling for more options for Near Prime borrowers with modest deposits, so I’m certain this launch will be well received. We have consistently listened and acted to refine our Near Prime proposition, ensuring it supports the types of cases brokers are seeing every day. Our Near Prime Index suggested that brokers are handling an increasing number of Near Prime cases and expect this to grow further, making it essential for lenders to deliver practical solutions.
“These products have been designed with a particular subset in mind, the borrowers who have only light adverse history - or little credit history at all. Combined with a small deposit, they can find it incredibly difficult to access a mortgage with many mainstream lenders. These new products aim to remove those barriers, ensuring borrowers can get onto, or move up, the housing ladder even if they have an imperfect credit history.”
Jonny Magill, Chief Commercial Officer at Haysto, added:
“As brokers, we see first-hand just how difficult it can be for borrowers who fall just outside of lenders’ Prime criteria to raise the funds they need, particularly if they only have a 5% deposit.
“This product will make a real difference to those borrowers. Atom bank continues to have a significant impact on this market, consistently helping to expand access to borrowers who don't meet mainstream lending criteria.”
