New Secured Loans Down, Arrears On The Way Up
Over the course of this year, we have reported frequently on the reduction in the amount of new secured loans being offered to consumers, as the credit crunch has got worse and the economy has slowed and now entered recession, so has the level of new lending dropped accordingly, as banks, building societies and other secured loan companies struggle to manage their own financial affairs, let alone offer loans to customers.
The latest figures from the Council of Mortgage Lenders (CML) have revealed the full extent of the decline in lending. New lending on homeowner loans and secured loans fell by in excess of 50 per cent to the end of November this year, from the same period twelve months ago, to reach a new low point of £14.6 billion by the end of last month, which is 22 per cent lower than the figure for October this year alone, showing that consumers still do not have confidence in the economy or the housing market, despite a 3 per cent cut in interest rates over the course of he last three months.
The CML have also predicted that 2009 is likely to be a difficult year both for those with homeowner loans and lenders alike, estimating that somewhere in the region of 500,000 homeowners with a secured loan on their property will be in an arrears situation of three months or more by the end of next year and that around 75,000 borrowers are likely to be facing repossession over the course of the year.
Although lenders are attempting to avoid repossessing properties, as it does not benefit anybody and should only be used as a last resort, the CML believe that in many cases this course of action will be unavoidable, however levels of arrears on homeowner loans are expected to rise significantly as an alternative to repossession.
Michael Coogan of the CML said “Recent glimmers of light in terms of government intervention to improve conditions to support new lending are helpful, but more will be needed. 2009 will be a challenging year, but borrowers who remain in employment will see some benefits in the form of lower mortgage rates.”
