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FSA reports on sub-prime sector

The way in which the 'sub-prime' mortgage market works in the UK has been investigated by the Financial Services Authority (FSA).

In its review of the sector, the regulator found that people who take out sub-prime loans, sometimes known as 'bad credit loans', tend to go through specialist brokers rather than shopping around for the best product themselves.

This means that, on many occasions, customers are passing up the chance to double-check the information given to them by their broker - which can lead to them being left out of pocket.

The FSA also found that sub-prime borrowers show a tendency towards picking loans due to their short term affordability - rather than how much they will cost in the long run.

"For sub-prime consumers the overriding consideration is to find the cheapest deal or APR," the report states.

According to the FSA, sub-prime makes up around ten per cent of the total UK mortgage market.

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