Mortgage arrears are seen by lenders as a good indication of whether borrowers are likely to have problems in the future. However anyone can have a blip in their credit for a few months so it’s useful to know what lenders will consider.
In the mortgage market lenders tend to look at arrears in the last 2 or 3 years. If you have had arrears during this period expect choice to be limited and rates to be higher.
Secured loans are different and generally only look at arrears in the last 12 months.
They also take a different view based on when the arrears occurred, not when they were cleared and are not too worried if a repayment was a week or two late.
For example, let’s say you had three months arrears which occurred 12 to 15 months ago. Since then you have paid extra each month and brought your mortgage up to date recently. None of the arrears occurred in the last year = good credit so you qualify for the lowest rate.
Another one of our lenders isn’t concerned if you have 6 months mortgage arrears at the moment so long as the last 12 months payments have been made. They too will offer their lowest rates subject to your credit score.
There are some second charge lenders which will accept arrears in the last year – usually up to 3 months and may add 1% or 2% to their best rate dependent on the amount of arrears and when they occurred.
Even if you have heavier recent arrears there are lenders who will consider your application but the rates start to rise more sharply at this point.
The timing of your arrears can have an impact. Speak to an adviser and ask them. You may find that delaying your application for a month or so could enable you to borrow at much lower rates.