By Pete Mugleston | Mortgage Advisor Pete has been a mortgage advisor for over 10 years, and is regularly cited in both trade and national press.
Updated: 17th February 2020 *
Having bad credit doesn't mean that you should settle for high mortgage rates. While your choice of lenders may be limited compared with cleaner credit applicants, you can still find providers offering great rates – so long as you know where to look.
In our guide, we'll be looking at how to get the best mortgage rates from providers, how your adverse affects your application, and who you can speak with to boost your application and increase your chances of getting better rates.
Click a link below or read on for a comprehensive read:
- How to get the best mortgage deals for bad credit borrowers
- Lender appetite for adverse credit mortgages
- How deposit affects mortgage interest rates for bad credit customers
- How the type of credit issue affects interest rates for bad credit mortgages
- How the number of credit issues impacts bad credit mortgage rates
- How the date the issues were registered affects things
- Does it make a difference if the issues are still outstanding?
- How the strength of your overall profile and application changes things
- Bad credit mortgage interest rates FAQ
- Speak to an expert in bad credit mortgage interest rates
If you’ve been declined a mortgage in the past due to your credit rating, or fear you might be, don’t be disheartened. There may be favourable deals available since the mortgage market is vast and specialist advice is on offer.
We work with expert brokers who specialise in arranging mortgages for people with adverse credit and they know the specialist lenders who will lend to borrowers in a variety of situations.
To find out what kind of mortgage rates you may be eligible for, even with poor credit, make an enquiry or call 0808 189 2301 for a free, no obligation chat.
Alternatively, read on to find out more…
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How do I get the best mortgage interest rates with bad credit?
Mortgage rates tend to vary from lender to lender and can change at the drop of a hat. However, the key to getting the best mortgage deals for bad credit borrowers is by meeting the eligibility and affordability requirements with as many providers as possible and having access to the entire market. That way, you can be confident of finding the lender offering the best deals for a customer with your needs, circumstances and credit score.
Every bank and lender has different criteria that needs to be met. Most often, bad credit means dealing with with high street banks and lenders who aren't able to accommodate your application. In order to be seen as an ideal applicant when you have a low credit score or bad credit history, you'll need to find a specialist lender.
The advisors we work with are whole-of-market mortgage brokers with access to all the lenders and banks in the UK. They'll explain the best mortgage options for people with bad credit and, once they understand your situation, they'll match you with the right lender and help you through the application process.
Read on to find out more about how mortgage providers assess borrowers with adverse credit against their name and the criteria they base their lending decisions on.
Lender appetite for adverse credit mortgages
In recent years, the number of lenders taking a flexible approach to bad credit customers has grown significantly, and as a result, an increasing number of providers are approving low rate mortgages for bad credit applicants, offering home loans to those with more severe credit issues, and launching products specifically for borrowers who fall into this niche.
Bad credit mortgage rates in the UK have changed in a number of ways over the last few years. For instance, borrowers with unlimited CCJs or a recently discharged bankruptcy are now eligible for higher loan to value ratios (LTV), and those with minor credit issues can end up with interest rates similar to those available on the high street. Affordable mortgages for bad credit customers are possible to obtain as this sector of the market is now very competitive.
Which lenders offer the best mortgage deals for adverse credit customers?
There is no one 'best' lender for everyone, as each mortgage provider has different lending criteria that needs to be met. The type of finance you'll get will depend on whether you have a clean credit rating or multiple issues on your file.
Credit rating isn’t the only factor the lender will consider when deciding what rates to give you, or whether to offer you a deal at all. Other variables they’ll take into account include:
- Your income: Obviously, the more you earn, the better in the eyes of the lender. Income from a PAYE salary is preferred by some lenders, but there are specialists who cater for self-employed borrowers and those who supplement their funds with bonuses, commission, benefits or other sources.
- Your age: Some lenders won’t lend to anyone over 75, others go up to 85 and a minority will lend to customers of any age as long as they are confident the borrower will be able to cover the mortgage payments during their retirement.
- The property type: Most houses and flats are find though properties with ‘non-standard’ construction (e.g. timber frame, thatched roof, etc) may require a specialist lender.
- Your deposit: The more you have, the wider choice of lenders you’ll be able to choose from. Higher deposits are sometimes required at bad credit lenders to offset some of the risk your poor credit rating might add to the deal.
How to get a cheap mortgage with bad credit
Every lender has a different policy on what they’ll accept regarding credit rating and the above criteria. Getting the best rates is a case of finding a provider where you meet all, or at least most of, the items on the eligibility and affordability checklists. The advisors we work with have access to the entire market and can connect you with the right lender if you make an enquiry.
How deposit size affects mortgage rates for customers with bad credit history
Simply put, the larger your deposit, the better as it directly affects the loan to value (LTV) ratio, which immediately improves the risk in the eyes of a mortgage lender as they will consider you more committed to repaying the loan.
The LTV ratio is simply the size of the mortgage loan compared to the value of the property, usually expressed as a percentage. For instance, if you have a £75,000 loan against a £100,000 property, the LTV ratio is 75% and the deposit makes up the rest.
The maximum LTV you’re likely to find for a residential mortgage is 95% and this drops to 85% for a buy to let. However, if you have bad credit, the lender might request a larger deposit (i.e. offer a deal with a lower LTV ratio) to offset some of the risk.
If you have what could be considered “light adverse” on your credit rating, and it happened within the last 2 or 3 years, such as the occasional missed payment or small satisfied default, then you may be able to get a mortgage with only 10% deposit, possibly even 5%, in the right circumstances.
If you have what could be considered “medium to heavy adverse” in your credit history, such as multiple defaults & CCJs or credit that’s fallen several months in arrears then you’re likely to need 15% deposit or more unless they are several years ago.
Moreover, it can be beneficial to save up the maximum deposit you’re able to cobble together, because a higher deposit means lower risk to the provider, and therefore, potentially, more favourable mortgage rates on your bad credit home loan.
How the type of credit issue impacts the interest rate for a mortgage with bad credit
Some credit issues are obviously a bigger deal than others, and the severity of your adverse credit may play a part in the interest rate your bad credit mortgage comes with. It could even be the pivotal factor when the lender is deciding whether to offer you a loan at all.
Below is a list of the most common adverse credit issues, ranked from the least to the most severe in the eyes of the majority of UK mortgage providers…
- No credit history (less impact on rate)
- Low credit score
- Late payments
- Mortgage Arrears
- Defaults / CCJs
- Debt management plans
- IVAs / Bankruptcy / Repossession (biggest impact on rate)
- See also… the impact of payday loans
If you have one of the more severe issues against your name, don’t panic. Although these credit problems can affect the interest rate on a mortgage with bad credit, with whole-of-market access, it might still be possible to find a favourable deal.
The expert brokers we work with are whole-of-market brokers who specialise in arranging mortgages for customers with all kinds of bad credit on their files.
Make an enquiry for a free, no-obligation chat with one of the experts we work with. They can help advise you on ways to manage your credit and source the best deals for your personal circumstances via their 'whole-of-market' access.
How many credit issues will lenders allow?
The number of adverse credit issues on a borrower’s file can also affect the interest rate on a mortgage with bad credit. Applicants with multiple issues will likely be asked to put down a higher deposit to offset the risk, or the lender will offer higher than average mortgage rates based on the amount of bad credit against your name.
Does the reason for bad credit matter?
Absolutely! Your credit report, if you read between the lines, can reveal a lot of information and this is what underwriters are trained to look at. If you’ve had multiple credit issues and they all happened at a similar time, but you’ve had clean credit before and after, then it’s more than likely an event of some kind has occurred.
Underwriters are a lot more willing to consider adverse credit if there are extenuating circumstances and the chances of them arising again are low.
How does the date the issues were registered impact bad credit mortgage rates?
Mortgage rates for bad credit applicants are often assessed based on the age of the credit issues (with other variables factored in), if a borrower has only had defaults.
It’s possible to get the market’s best mortgage interest rates with bad credit if the credit issue has fallen off your report (i.e. is more than 6 years old), although there are exceptions.
For example, most banks and high street lenders will automatically decline your application if you’ve ever had a bankruptcy, although some will overlook certain issues far sooner than six years after discharge.
Some lenders will accept bankruptcy customers after three years, a handful after one.
Pinpointing exactly when you’ll qualify for the best interest rates on your bad credit mortgage loan can be tricky, but with whole-of-market advice from the brokers we work with, you will be connected to the lender most likely to offer you low mortgage rates with your needs, circumstances and bad credit specifics in mind.
Does it make a difference if my credit issues are still outstanding?
Yes! Interest rates on a mortgage for a bad credit borrower can be affected by outstanding credit issues.
Some mortgage lenders will only consider offering their discounted rates for customers whose credit issues have been settled, and with these providers, you may have to wait until your bad credit is fully resolved before you qualify for low mortgage rates.
Outstanding credit issues can also impact the amount you can borrow as lenders will often factor in payments to outstanding defaults when making their affordability calculations. For example, if you have defaulted on accounts worth £5,000 then they will be factored into things in a similar manner to if you had £5,000 of outstanding credit card debt.
Thankfully, there are specialist lenders out there who are more interested in when the debt was registered. If the borrower has had good financial conduct since then, the adverse credit may have little or no impact on the lending decision or the rates that are offered.
However, bankruptcy and repossessions can be exceptions, since many lenders (but not all) will assess the application based on the discharge date and ask for any legacy debts that were not written off to be settled in full before the mortgage application is made.
How your overall credit profile will impact the mortgage rates offered
The best mortgage deals for bad credit often require a specialist lender, as we’ve already discussed, but even borrowers with a 999 credit score who have never missed a payment can be turned down for a mortgage based on a number of other factors, such as…
- Having no credit history at all - you've never used any form of credit.
- Your debt to income ratio - if your other outgoings are deemed too high.
- Work history - if you're in a new job, have been self-employed for only a short time, have irregular income or work in an unstable industry sector.
- Address history - if you've lived at multiple addresses in the last 3-6 years.
- Registration on the voter’s roll - being registered can help.
- Other eligibility criteria - see the section about lender appetite above.
If you’ve been turned down for a mortgage based on any of the above factors or offered an unfavourable deal, get in touch. The advisors we work with are experts in credit scores and mortgage rates, and can help you find the best lender based on your circumstances.
Call 0808 189 2301 or make an enquiry to speak with a specialist broker who can connect you with the lender offering the best mortgage deals for customers with a bad credit rating.
The service we offer is free and there's absolutely no obligation.
Bad credit mortgage rates FAQ
Here you will find supplemental information about bad credit mortgage rates, based on the most frequently asked questions we receive about them.
How much can I borrow on a bad credit mortgage?
Most mortgage providers will cap the amount they’re willing to lend you based on multiples of your income. Some will offer you x4.5 of your earnings, others x5 and a minority will stretch to x6, under the right circumstances. If you have bad credit, however, it may be more difficult to convince the lender to offer you one of the higher income multiples, but at specialist lenders this might not be an issue, as long as you meet their other requirements.
Other eligibility factors, such as the property type, your age, the amount of deposit you’re able to put down and how you make your income (e.g. self-employed borrowers may need a specialist lender) may also affect the size of the mortgage that you qualify for.
What is a bad credit mortgage calculator?
This is a term that’s sometimes used to describe the tool used by bad credit mortgage providers to determine how much they’re willing to lend you.
An adverse credit mortgage calculator will feed in information such as your income, outgoings and credit rating and use algorithms to work out how much you’re able to borrow.
Some adverse credit mortgage calculators are more sophisticated than others, and will take multiple variables into account to give a fuller picture of affordability, while others simply present a multiple of your income offset against your outgoings.
The main thing to remember with any online mortgage calculator is that they can only provide a very rough estimation of what sort of mortgage terms you may be able to get. To get an accurate idea of the sort of mortgage rates and terms you could get taking into account your whole situation, talk to one of the expert whole-of-market brokers we work with on 0808 189 2301.
Does this calculation require a hard credit check?
No, not necessarily. If a UK lender runs your data through their bad credit mortgage calculator, it doesn’t mean they have carried out a hard credit check that will remain on your file. Although some providers will draw data from the credit reference agencies, they may only carry out a ‘soft’ search, which only you will be able to see on your record.
Are mortgage rates always based on credit score?
Not always. There’s a direct link between credit scores and mortgages interest rates at some lenders and getting a deal from one of these providers can be difficult if you have a low credit score.
However, not every lender looks at your credit ‘score’ - they simply ‘check’ whether you have any adverse on your file, and even if that’s the case it may be possible to get a favourable deal with the help of a specialist advisor with access to the whole market.
What is the minimum credit score for the best mortgage rates?
This will vary from lender to lender, and whether you end up on their best interest rates will ultimately depend on their appetite for risk and other eligibility and affordability criteria beyond your credit score, such as your income, deposit and your monthly outgoings.
Your credit score is based on data from the UK’s three main credit reference agencies: Experian, Equifax and Callcredit. Experian’s score is out of 999 and a good score from them is 700 and up, while anything over 800 is considered excellent. Equifax’s score is out of 700 and anything from the 475 mark up is considered excellent by their standards.
Callcredit is slightly different as they score out of 710 and then assign the borrower a rating between 1 and 5 - 1 being the lowest rating and 5 is outstanding.
It’s important to keep in mind that not all mortgage providers base their lending decision on the numbers these agencies throw up. Some use only one or two of them, while others don’t take credit score on board at all, preferring to carry out a credit ‘check’ instead.
Most lenders who have an appetite for adverse credit are more concerned with the substance of your credit history and the overall strength of your case so even if one of the credit reference agencies is giving you a very low score, that doesn’t mean you cannot get a mortgage.
Remember, these firms only see your credit history, they don’t have access to things like your income, which lenders will always looks at when they assess your application.
What is the mortgage rate for bad credit?
The mortgage rate you can expect to get when you have bad credit will vary from lender to lender.
There are various criteria every mortgage lender applies when assessing a mortgage application. The same is true when it comes to a bad credit application and the rate you will be offered will vary according to how well you match up with their eligibility criteria.
The deposit you have for your bad credit mortgage may also impact the rates a specialist lender might be willing to offer you.
To find out what mortgage rate you might be able to get, talk to one of the expert advisors we work with on 0808 189 2301. All the experts we work with are whole-of-market brokers and we'll match you with an advisor experienced in helping customers get a mortgage with bad credit.
With access to mortgage lenders across the UK and working relationships with specialist bad credit lenders, they will be able to you save time, hassle and money by making sure you get the best possible rate, according to your circumstances.
What are the average mortgage interest rates for customers with bad credit?
They are constantly in flux and the current mortgage rates for bad/poor credit borrowers can change at the drop of a hat.
The important thing to remember is that while some lenders won’t offer you their most favourable interest rates if you have any adverse credit against your name, there are specialist providers who might consider doing so. The terms you get will depend on the severity of the credit issue, how long it has been on your file, and how closely you meet their other eligibility and affordability requirements.
There are myriad factors which can decide which rates you can get and the rates themselves vary greatly. Get in touch with one of the bad credit mortgage advisors we work with and they’ll be able to tell you which rates from the whole of market you could get.
Can I get a fixed rate mortgage with bad credit?
Yes! There’s no reason why not. Fixed rate mortgages generally come with the same credit score/rating requirements as tracker rate mortgages. As such, they aren’t any more difficult to get. If anything, they’re actually more attainable as some lenders might prefer you to take out a fixed-rate product if affordability is tight, as with a repayment guaranteed not to change, it’s much easier to budget for.
What would the rates be on a 30-year mortgage for a customer with bad credit?
This would depend on the lender and it's pointless citing an average figure because interest rates are constantly in flux and can shift at any time.
The important thing to keep in mind is that a longer mortgage term such as 30 years (25 years is average) might make some lenders more confident that you’re capable of paying the mortgage. A longer term usually means the monthly payments will be less.
This could help offset any perceived risk caused by your bad credit, but locking yourself into a longer mortgage should never be done lightly, so be sure to seek specialist advice first.
Can I get good remortgage rates?
Yes, you may be able to get a decent rate if you remortgage your existing property. For more information, read our remortgaging with bad credit guide.
Why specialist advice is so important for bad credit customers
To ensure you end up on the best rates, you'll need to find a mortgage company that specifically deals with bad credit borrowers. Many banks and high street lenders are cautious when negotiating bad credit mortgage deals with adverse credit customers, offering them less favourable rates to minimise the perceived risk, or turning them away outright.
The advisors we work with have access to the entire market and will compare bad credit mortgage deals, before connecting you with the best mortgage companies for customers with poor credit scores or bad/adverse credit. They can also make sure the lender you’re paired with is best equipped to cater for a borrower with your specific needs and circumstances, as well as your credit rating/score.
Speak to a bad credit mortgage rates expert
If you have any further questions about mortgage interest rates for customers with poor credit and want to speak to an expert for the right advice, call 0808 189 2301 or make an enquiry.
The brokers we work with are all whole-of-market experts with access to mortgage lenders across the entire industry. We'll match you with a broker experienced in successfully helping other customers in similar situations to your own.
They will be happy to answer all your questions and carry out a bad credit mortgage comparison before connecting you with the best mortgage companies for bad credit customers.
We don’t charge a fee and there’s absolutely no obligation.
*Based on our research, the content contained in this article is accurate as of most recent time of writing. Lender criteria and policies change regularly so speak to one of the advisors we work with to confirm the most accurate up to date information. The info on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisors working with us are fully qualified to provide mortgage advice and work only for firms who are authorised and regulated by the Financial Conduct Authority. They will offer any advice specific to you and your needs. Some types of buy to let mortgages are not regulated by the FCA. Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage. Equity released from your home will also be secured against it.
Pete, an expert in all things mortgages, cut his teeth right in the middle of the credit crunch. With plenty of people needing help and few mortgage providers lending, Pete found great success in going the extra mile to find mortgages for people whom many others considered lost causes. The experience he gained, coupled with his love of helping people reach their goals, led him to establish Online Mortgage Advisor, with one clear vision – to help as many customers as possible get the right advice, regardless of need or background. Pete's presence in the industry as the 'go-to' for specialist finance continues to grow, and he is regularly cited in and writes for both local and national press, as well as trade publications, with a regular column in Mortgage Introducer and being the exclusive mortgage expert for LOVEMoney. Pete also writes for OMA of course! Read more about Pete here...
Bad Credit Mortgage Information
Looking for specialist advice? Read through our articles about different types of bad credit situations, and how best to prepare yourself to find the right mortgage for you