Profiling denying bad credit mortgage borrowers

'Customer profiling' technology is pushing high-risk mortgage borrowers towards higher rates.

Research carried out by mortgage adviser mform.co.uk finds riskier borrowers – those with poor credit ratings or younger borrowers for example - may only be offered standard variable rate (STV) deals by their lender when their current mortgage offers run out.

Systems such as Intelligent Churn Management sorts borrowers into categories based on how likely they are to switch and how likely they are to get into trouble with their current loan – deals are then made on this basis.

Most at risk are younger borrowers with less well-paid jobs that may only be offered STV deals – typically around 7.25 per cent – while older and wealthier customers will be offered the most competitive deals.

"It makes some sense for lenders to use profiling tools to manage their mortgage books. It is estimated to cost around 0.5 per cent more to sign up a new customer compared to keeping an existing one," said Francis Ghiloni, mform business development director.

"However, it makes no sense for borrowers simply to accept what is offered by lenders.

"If their computers classify you as only fit for a standard variable rate then you ought to move."

In response to the growth of this technology, mform.co.uk recommends mortgage borrowers shop around for their next deal, and with around 116,000 mortgage customers coming to the end of a deal each month this year, the market is vast.

"The credit crunch has made mortgage availability the major issue and lenders are increasingly taking a tough line with existing borrowers. However, they can still re-mortgage elsewhere and should," concluded Mr Ghiloni.

Chris O'Toole