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The removal of it's subprime range by Deutsche Bank's mortgage division, DB Mortgages, could signal the start of a widespread review of subprime mortgage products.
Over recent months there has been a large influx of new companies offering products in this sector and prices have dropped as a result of the intense competition. A commentator from John Charcoal suggested that many lenders of subprime mortgages could be repricing or even temporarily removing their products as investors become more cautious about the sector.
Currently the rate difference between mainstream mortgages and deals for applicants with poor credit history or county court judgements may only be 2 or 3 per cent, which many analysts feel does not adequately represent the increased risk of non-repayment. Some near prime products, those for customers with only one or two missed repayments on other debts, may have been less than 0.5% more expensive than standard mortgages.
However a widening of the gap between prime and subprime mortgages has already started and is predicted to expand even further, especially if repossession rates continue to grow, as they have done this year so far.
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