According to market research company Mintel, as many as one in three people holding UK mortgages - almost 5.5million people - are facing the prospect of severe financial difficulties, all because of the sub-prime crisis in the USA.

Mintel says that it's not just those with poor credit records who are being assessed as ‘risky', but those who move home regularly and the self-employed. After carrying out a thorough analysis of the nation's entire mortgage book they have concluded that almost one in ten of the UK's 16.5 million mortgage holders would be classified as sub-prime borrowers. Almost another one in four can be classified as non-standard borrowers; these are people who may be self-employed, have irregular income or have fallen behind on regular payments and therefore fall into the ‘high-risk' category.

Because of the perilous state of the financial markets following the mortgage crisis in the US, people who are not in traditional, financially secure situations will become the first casualties of the tighter lending criteria imposed by lenders. Homeowners in that category will now face increased fees and higher interest rates if they move or attempt to remortgage.

However, it is ironic that more people are moving into the so-called ‘non-standard' mortgages category due to changing circumstances, such as increasing levels of divorce and self-employment, just as the estimated £125billion market becomes more expensive, and loans become harder to obtain. Many lenders are already withdrawing products such as bad credit mortgages, and seeking to improve the margins on their remaining lending portfolios. It's unlikely that borrowers in the ‘non-standard' category will be unable to compare mortgage products favourably against traditional mortgages; the interest rates will be higher and the supply severely restricted, as lenders become more risk averse.

Senior Finance Analyst at Mintel, Toby Clark said: "Sub-prime borrowers form only the tip of the ice-berg. As lenders become increasingly cautious, mortgage-holders will be offered less than favourable terms when they need to remortgage. As many will not be able to afford the increases, we may see millions suffer."

Clark points out that the amount of standard mortgage holders of two and three year fixed rate deals due to expire shortly, will only make the situation worse. Many will find that arrangement fees and interest rates are dramatically higher than when they took out their original deals. In some cases borrowers will be unable to afford the increased payments and could be facing the spectre of repossession.

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