The credit crunch

the turmoil seen in the whole financial market in the US aswell as the knock on effect over in the UK. The credit crunch has not only affected consumer confidence but seen lender confidence affected especially those owned by US firms or with US overseas interests. Therefore, the key question on everyone’s lips seems to be ‘what lies ahead for the Secured Loan and Mortgage markets now?’.

In recent weeks we have seen secured loan lenders withdrawing products, limiting products, tightening underwriting criteria and some lenders such as SPPL (southern pacific personal loans) and Kensington pulling out of the market altogether. Secured Loan lenders are aware that they can only continue to lend money if they are able to sell their mortgage book. With this and consumers difficulty in making repayments criteria will tighten and those with a poor credit score will find it more difficult to access further credit. Consumer confidence in financial institutions has fallen as was particularly evident with the Northern Rock crisis and consumer spending has been hit by consumer confidence and increasing cost of living following the interest rate rises and fears seen this year. However, what is surprising is that the actual amount of people searching for a secured loan has remained fairly stable. This may be due to the fact that consumer debt continues to rise and customers therefore continue to consolidate and refinance existing debts. Britain’s personal debt is increasing by £1 million every four minutes. The average consumer borrowing via credit cards, motor and retail finance deals, overdrafts and unsecured loans has now rises to £4,515 per average UK adult at the end of July 2007.It could also be that the secured loan market will not be as effected as first thought or feared.

It was also found that the loan amounts that customers were requesting were relatively unchanged. In fact it continued to rise last month by 8% from £16,737 to £18,078.

The area that did suffer was in the sale of secured loan leads from brokers and IFA’s. This maybe due to the time spent replacing deals on products that have now been withdrawn. It could also be that these brokers are having to spend longer trying to find the best product with the changes to products and underwriting criteria. It could also be that a lot of the brokers will redirect their attention on more stable and reliable areas of business where their own confidence is at the highest. Either way, it seems those who work or invest in the industry seem a lot more worried than the clients themselves. Yes, brokers should be aware of market conditions, threats and weaknesses; however, maybe brokers, intermediaries and advisers should remember that where there is a healthy demand is where there are healthy profits. While some brokers may be beginning to shy away from secured loans this will only create massive opportunities for others.

To speak to an expert in secured loans visit www.easyukloans.co.uk

1/11/2007