Prime, subprime, Optimus Prime, and now, “complex prime.”
While it may seem like a new way of offering home loans in the United Kingdom, it’s probably just the same old game with a new name.
The phrase, broken down, means lending to prime borrowers with complex situations.
In other words, good borrowers who don’t fit inside the box for whatever reason, whether it’s because they’re without sufficient credit history or involved in a complicated self-employment situation.
Supposedly “complex prime” requires proof of income, but how borrowers prove their income seems to be gray, which means these loans may be more like the stated income loans offered stateside than anything else.
Of course, lenders argue that the loans are much less risky than the subprime loans offered before the mortgage crisis, thanks to higher loan-to-value requirements and a more robust underwriting process.
And mortgage rates are meant to be competitive with those tied to prime loans.
The big worry, of course, is that lenders will get ultra competitive and take on more and more risk until “complex prime” shares the same stigma as subprime and the very mistakes we “learned from” are simply repeated.