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Now Gmac - Rfc Tighten Criteria And Hike Rates

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GMAC-RFC no longer accepting unlimited adverse as it increases rates by 0.75 per cent

Tanya Powley - 21-Aug-2007

GMAC-RFC has made changes to its product range including withdrawing its unlimited adverse business product just days after it last re-priced.

The lender confirmed it will be increasing rates by 0.75 per cent on its sub-prime range and 0.50 per cent on its mainstream, self-cert and buy to let products.

GMAC says it will not be accepting any more unlimited adverse business and it has reduced its maximum LTV to 90 per cent from 95 per cent.

GMAC head of marketing Jeff Knight says: "Rates have been artificially low this year with new competition in the market. This is now forcing rates back to the right level."

He adds: "Our changes to criteria is a tactical move by us. We want to be prudent what with the market going through a challenging time."

Knight admits the move will see it reduce the volume of business it gets but says they are using it as an opportunity to re-evaluate its product range.

GMAC says it cannot rule out any further changes to products and rates.

GMAC will be withdrawing their rates tomorrow. It launched its current rates last Friday for packagers.

This can be seen as yet another example of the impact of the US sub-prime crisis on the UK mortgage market.

The last week has seen Edeus, Kensington, Mortgages Plc all announce rate increases. Other lenders including Infinity Mortgages, Unity Homeloans, UX Mortgages and Victoria have yet to launch a new range of products after withdrawing from the market.

Both Infinity and UX Mortgages yesterday confirmed they would be postponing their new ranges due to continued market turbulence.

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So people trying to roll over to new deals will be stuck on the SVR or in the best case on a much worse rate than they are currently on.

The upshot of this is that repos are going to soar for the sub prime companies, flooding the market with unsellable properties.

I am bit sure I understood it entirely, but does this mean the SVR is going up by 0.75% and 0.5% respectively? Or is it just the initial rates going up like this?

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I think it is the whole lot

So effectively interest rates have gone up 1.75 - 2% in the last year for these people.

Poor s0ds. The weak and gullible are always the first to go.

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What interests me more is the LTV. If this has changed from 95 to 90% what happens for those remortgaging with a current LTV of 95%. It also pushes up the required deposit making houses even further away for many who previously had 95 or 100% mortgages.

I see this sort of practice is becoming widespread, watch the number of sales start to crawl and from there I can see only 1 direction and it ain't UP or ACROSS.

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Are we going to see a snowball affect with sub-prime interest rates?

Rates are already increasing - which will no doubt cause more people to default particularly when they come off their initial rates and will have no choice but to accept whatever the then SVR is - but more defaulters will force the mortgagors to put the rate up even further?

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