Best Loans News

There was a lot of doom and gloom throughout last year regarding the economy of the UK, particularly in the housing and home owner loan market. But one area which saw a significant level of growth was that of the first time buyer loan market.

The latest figures from e surv, have shown that the number of first time buyers entering the housing market and applying for their first homeowner loan or mortgage, saw a marked increase over the course of last year, with the main reason for this being the increase in the number of home owner loan products which offer higher loan to value ratios.

The number of new home owner loans with a loan to value of 85 per cent or higher increased by around 32 per cent over the course of 2011, compared with the previous twelve month period, with the majority of these loans being chosen by first time buyers who have been struggling to raise sufficient deposit in the past.

There were a total of 57,301new loans with a loan to value in excess of 85 per cent during last year, almost 10,000 more than the previous year and the average loan to value for a first time buyer in the UK increased to 69 per cent in 2011, up from 66 per cent as at December 2010.

With higher loan to values on offer to first time buyers, coupled with low house prices and cheap loan rates due to the low base rate of interest, the housing and home owner loan market is now at its most accessible and affordable level since August 2007.

Richard Sexton of e surv said “Banks have made a concerted effort to increase the amount they lend to first time buyers, which is reflected in the big jump in higher loan to value lending. They are also supplementing this with more lending to buy to let investors.”

There was a little bit of good news yesterday, for all those home owners in the UK who are struggling to pay off their personal loans and credit card bills after their Christmas overspending, when it was announced that the base rate of interest for loans and savings was to remain on hold for another month.

The announcement was made following the regular monthly meeting of the Bank of England’s Monetary Policy Committee (MPC), when it was decided to keep loan rates on hold and also not to extend the current programme of quantitative easing.

The base rate of interest will therefore have remained at its historically low level of just 0.5 per cent for a total of 34 months now, since March 2009, when most people thought that the cheap loan rate would only last for a very short time.

Although the level of quantitative easing has remained at £275 billion for the time being, it is widely expected that this will probably be extended next month, as the Euro zone crisis deepens.

The announcement that the base rate of interest was to stay unchanged has come as no surprise to financial experts or borrowers alike, many of whom are now taking cheap loan rates for granted, as the current level of inflation is still well above government target figures and the UK economy is too fragile to tolerate a rate rise just yet.

Ben Thompson of Legal & General Mortgage Club said “The Christmas period and start to the New Year kicked off with all manner of negative predictions and forecasts, however there have been some glimmers of hope as well. These glimmers are just that and there is a long way to go before ay fiscal tightening is required.”

It is a well known fact that many small businesses have been finding it difficult to obtain the business loan they require to keep their company going since the credit crunch, largely due to the reluctance of high street banks to offer loans to anyone in the current economic climate.

However, the full extent of this problem has become apparent following the results of a survey conducted by the loan company Borro, which has revealed that around 12 per cent of small business owners in the UK have had to use their own home as security for a business loan over the course of the past twelve months.

The survey also found that somewhere in the region of a further third of business owners would be prepared to consider using their home as loan security for a business loan, if they were unable to obtain finance from another source.

Many of these secured loans taken by business owners are not even for expansion programmes within the business, but in many cases, just to keep the business afloat, with additional funding to provide cash flow and to cover late payments from customers, or pay the weekly wages bill.

The survey found that as many business owners are now taking out secured loans on their own home as those who are still able to take an unsecured loan for their business needs, thereby placing their home at risk for their business.

Paul Aitken of Borro said “It is surprising to see that as many small business owners would consider applying for a secured loan as would apply for an unsecured loan or an overdraft. This is a sign that banks continue to make it hard to access unsecured loan facilities, so those that require property as security become the next thing to turn to.”

It has become a fairly well known fact that a large proportion of the UK population are struggling with their personal loan and credit card debts due to the current economic conditions in the country at the moment, but the full scale of this problem is perhaps not fully appreciated by many.

According to new research from the University of Nottingham on behalf of the Money Advice Trust, somewhere in the region of 20 per cent of adults in the UK, the equivalent of around 10 million individuals, are facing a constant struggle to stay on top of their loan and credit card debts.

The research also found that there is a huge potential demand for debt advice on how to manage loan and other debts, with around 2.5 million people in the UK who already have some level of arrears on either a personal loan or some other form of personal debt or bill.

The Money Advice Trust figures show that 1.54 million people obtained free help and advice on their loan debts over the course of last year from the various debt charities in the UK, but the predictions are that this figure will see a significant increase in the first six months of this year, largely due to an increase in unemployment figures and a lack of growth in wages.

Joanna Elson of the Money Advice Trust said “2011 was a tough financial year for many families across the UK; unfortunately more people are likely to struggle in 2012, with unemployment figures rising and wage growth relatively flat, while prices are going up.”

“It is so important that people are aware of and can access free advice that can make a crucial difference between allowing a difficult situation to spiral into unmanageable debt and regaining control of your finances.”

Young males aged between 25 and 34 in the UK are better at putting money away into savings than older generations are, according to a new survey conducted by National Savings and Investments, despite the fact that another survey shows that this age group also have more personal loan debt and bad credit loans than other age groups.

The survey found that the typical saver between the ages of 25 and 34 is putting away an average amount of £104 on a monthly basis, well above the national average savings figure of just £88.

Apart from financial security and being able to avoid taking out personal loans in the future for the things they need to purchase, such as a new car, for example, one of the biggest reasons for this increased level of savings is to build enough of a pot to cover the cost of a deposit on a house, in order to meet lenders’ restrictive loan to value levels.

Many younger people between the ages of 16 and 24 are also managing to save on a regular basis, with an average savings amount of 7.8 per cent of their monthly income, which is the best of any age group.

Whilst many in this group are saving for holidays or a car, so that they do not have to take out a holiday or car loan, others may have learned a lesson by seeing the financial position of their parents, many of whom are burdened with personal loan and credit card debt on top of their home owner loan repayments and increasing utility bills.

Whilst this is clearly good news, the flip side of this situation is that the same age group also account for the highest percentage of Debt Relief Orders for bad loan and credit card debts, which highlights the need for better financial education in schools from an early age.

Over the course of the past couple of years or so, pay day loans have grown dramatically in popularity, particularly amongst those individuals who are unable to get a traditional bank loan, due to an adverse credit history. One particular area of growth in this sector is that of online pay day loans.

However, one lawyer, who previously worked for the Financial Ombudsman Service (FOS) has warned that pay day loans which have been sold online, could end up being the next big mis selling scandal, due to the way that they have been sold and the lack of advice for borrowers.

James Ward claims that, due to the fact that many pay day loan companies give the promise that a borrower can receive their loan funds instantly, there is no time for the lender to assess whether the borrower will be able to repay the loan, or whether they should be allowed to take out any kind of loan at all.

A traditional bank loan will assess a customer’s credit rating before offering them a loan and then ensure that they are able to afford the monthly loan repayments. However, many people would be rejected for a bank loan at this stage and in many cases this is why they turn to pay day loan companies as an alternative for their loan.

Mr Ward has called for regulation in the pay day loan sector and a ban on online pay day loans altogether, unless there is a minimum cooling off period before the loan funds are provided and there is a limit on the number of loan roll overs allowable.

Mr Ward said “A vulnerable customer, desperate for some quick cash, will simply tick whatever boxes they need to get it, without reading the small print. It is highly doubtful that they will understand the terms of the loan.”

Several years ago, before the effects of the credit crunch hit the housing and home owner loan markets, if home owners required additional funds, it was relatively easy to take an equity loan on their home, either in the form of a further advance, remortgage, or a secured  loan.

However, with property prices falling and many borrowers being left with little or no equity in their home and banks and building societies lowering the maximum loan to value on new loans to much lower levels than previously, people are now repaying their home owner loan debts, rather than increasing their loan amounts.

The news comes from the latest figures from the Bank of England, which show that over the course of the third quarter of last year, there was a net repayment of housing equity loans, as a growing number of borrowers made additional repayments on their secured loans and home owner loans in an attempt to increase their equity holding.

Although more people are now making serious efforts to repay their loans early, or at least reduce the outstanding balance, the Bank said that the overall net repayment on loans was more to do with fewer people taking out new loans and further advances, rather than those individuals who are reducing their home owner loan debts.

Apart from a more cautious attitude towards borrowing and taking out new loans, one major reason for this reduction in equity loans is down to the fact that many individuals simply do not have sufficient equity remaining in their home to be able to take additional loans.

In a statement, the Bank said “The negative figures indicate a continued injection of hosing equity by households overall, with a net flow of lending secured on dwellings remaining weaker than investment in housing.”