This report provides insight on bank attitudes to sub-prime lending in Europe, along with how these markets are changing and where the opportunities lie for lenders.



Report Highlights
Following on from the launch of sub-prime lending in the US, the UK sub-prime mortgage market began to develop in the mid-1990s The UK sub-prime mortgage market has since expanded significantly, and now offers a wide variety of choices, including different repayment options, interest rates, and payment holidays. Ireland is fast becoming a more competitive sub-prime lending market, with a number of lenders (and UK lenders) in the market, including CitiFinancial, HFC Bank, Start Mortgages, and GE Money. Moreover, investment banks are entering the market, as well as the announcements that some mainstream lenders will also become involved. The development of sub-prime lending is linked to a competitive and often times a saturated mainstream lending market, yet there are a number of other factors that also have to be weighed into the equation. A country needs to have a large enough sub-prime population, the right regulatory climate, enough credit information available, among others.


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Table 1: A sample of lenders likely to be offering credit to sub-prime individuals by country, April 2007 20
Table 2: How has the proportion of customers that apply to your bank and are declined changed in recent years? 72
Table 3: Would you typically have problems lending to customers or reject customers outright who have a minor history of credit arrears? 73
Table 4: Would you typically have problems lending to customers or reject customers outright who have a major history of credit arrears? 74
Table 5: Would you typically have problems with lending to people with debt reconstructions on their record? 75
Table 6: Mortgage and consumer credit gross advances in Ireland, 2001-2005 75
Table 7: Debt write-off by banks (individuals), December 2001-December 2006 76


Figure 1: A certain degree of subjectivity is needed in a definition of the sub-prime population because some lenders are inevitably willing to accept greater risk than others, 2007 10
Figure 2: Drivers of the sub-prime population and consequences, 2007 12
Figure 3: The degree of development of sub-prime lending differs greatly across Western European markets, 2007 21
Figure 4: The majority of high street banks in Western Europe have tightened their lending criteria in recent years, 2006 30
Figure 5: The majority of banks in Western Europe remain somewhat credit averse, 2006 32
Figure 6: Virtually all mainstream banks stay pretty much clear of customers with a major history of credit arrears, 2006 33
Figure 7: Banks in Western Europe almost always either reject or have some problems with lending to people with a debt reconstruction on their record, 2006 35
Figure 8: Both Ireland's mortgage and consumer credit markets have grown significantly in recent years, 2001-2005 38
Figure 9: GE Money clearly targets the sub-prime population - among others - for its mortgages, February 2007 42
Figure 10: Banco Primus targets sub-prime and mainstream customers for consolidation loans, February 2007 54
Figure 11: In Datamonitor's opinion, Germany, Ireland, Portugal and Spain are highly attractive sub-prime lending markets for the future, 2007 60
Figure 12: The number of debt-write offs by banks has continued to increase in the UK, December 2001-December 2006 66
Figure 13: Datamonitor's core consulting capabilities 81

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