Home Owner Loan Market Shrinking
The slow recovery of the UK economy and the prospect of Government spending cuts and increased likelihood of rising unemployment have made many individuals in the UK particularly cautious about the future, particularly when it comes to their loans and other debts.
This is particularly the case within the home owner loan and mortgage market, where many borrowers who are outside of any repayment penalty period are now overpaying on their loan by large amounts every month, in order to reduce the balance and build themselves a safety net for the future.
At the same time as this, new home owner loan numbers are also reducing, as potential borrowers either do not want to take the risk of additional borrowing, or are unable to be accepted for a new loan, due to the tightened lending criteria from banks and building societies.
As a result of this, the home owner loan market is shrinking and the net amount owed in home owner loans has now reduced for the past ten consecutive months.
During the first three months of last year, the net home owner loan market reduced by £5.3 billion, as people overpaid on their loans. Throughout the second quarter of the year, this figure had increased to £5.8 billion and by the end of September last year, the figure had reached £6.1 billion.
With loan markets continuing to be difficult and a growing uncertainty over the immediate future of the UK economy, many experts believe that this trend of reducing loan amounts will continue for some time to come.
One economist said “The figures indicate that there is an ongoing desire and perceived need of many people to improve their personal balance sheets. The ongoing and increased net injection of housing equity is adding to the constraints on consumer spending including high unemployment, negative real wage growth and high debt levels.”
