Subprime borrowers 'set to fail'

Subprime mortgage lenders have come under fire as data reveals spiralling numbers of vulnerable borrowers are suffering severe debt and the prospect of homelessness.

A report issued today by the Citizens Advice revealed 770,000 people had missed at least one mortgage or secured loan payment in the last 12 months.

The charity has seen an 11 per cent increase in problems related to mortgage and secured loans arrears in the last year (2006/07). Meanwhile court action for repossession has risen so steeply Citizens Advice feared it has reached a level last seen in the repossessions crisis of the 1990s.

Critics have branded the findings of the report, entitled Set to Fail, as "too simplistic". But Citizens Advice said it was not just "dubious advice" creating the problem but a failure of regulation.

David Harker, chief executive of Citizens Advice feared the "cavalier" behaviour of some brokers and subprime lenders was seriously undermining home ownership and hitting the most vulnerable borrowers hardest.

"Many subprime lenders are flouting the rules on responsible lending by granting loans when it's clear the borrower will not be able to afford to repay it from the very outset, then getting tough immediately things go wrong," he added.

The Council of Mortgage Lenders (CML), however, said the evidence was based on a skewed sample of borrowers. It said most borrowers received a high level of help and care from lenders.

Michael Coogan, CML director general said the report had taken a sensationalist tone.

He added: "In fact, subprime mortgages give people a way to rehabilitate their finances and are important in a financially inclusive mortgage market."