Best Loans News

At a time when the Bank of England base rate of interest for loans is at a historically low level and the majority of lenders are competing to see who can offer the best cheap loan deal on their products, the Royal Bank of Scotland has just announced that it is increasing interest rates on some of its home owner loan products.

The bank confirmed that it increased interest rates on its offset loan products on the 1st of March this year, by 0.25 per cent and that interest rates on the bank’s One Account loans will also increase by 0.25 per cent on the 1st of May.

RBS said that the reason for the increase in loan rates was due to the increased cost of wholesale loan funding and pointed out that this is the first increase in loan rates from the bank since June 2008.

It has been estimated that the rate increases are likely to affect somewhere in the region of 200,000 existing RBS home owner loan customers, many of whom may be tempted to look for a new cheap loan deal with an alternative lender.

RBS have said that the typical offset or One Account loan customer will see their loan rate increase to 4 per cent, which is the same as the bank’s standard variable rate for existing loans.

A spokesman for the Royal Bank of Scotland said “Over the last year, the cost of funds at which we need to borrow at to fund our mortgage and home owner loan commitments has risen considerably. We have absorbed the cost during this period, but have now decided to pass on some of this increase.”

“We have written to all customers impacted to advise them of the changes. The bank has a full range of alternative options for any customers who prefer to switch from their current loan product.”

In recent years it has become particularly difficult for someone to obtain an unsecured loan from a traditional bank or other loan company, even if they have a good credit history and the best cheap loan deals advertised by lenders are often only available to a select few borrowers.

This has led to potential borrowers looking for alternative sources of funding for their personal loan requirements and a growing number are now using peer to peer lending organisations, such a Zopa for their loan needs.

Zopa match up investors who wish to get a better return on their savings, with credit worthy borrowers who are looking for a cheap loan and since their launch back in 2005, Zopa have arranged somewhere in the region of £180,000,000 worth of personal loans on a peer to peer basis.

The latest figures from the lender have revealed that 45 per cent of all the personal loans they have arranged since their launch have ended up being repaid in full before the intended loan repayment date.

The typical APR (Annualised Percentage Rate) on a Zopa personal loan works out at around 6.1 per cent and there are no penalties applied to the loan if the borrower wishes to repay it early, making this a particularly attractive cheap loan deal.

The majority of borrowers who take a personal loan with Zopa are likely to end up paying around 20 per cent less than they would on the equivalent bank loan.

Giles Andrews of Zopa said “In almost all circumstances, it makes good financial sense to pay off your debts a quickly as you can, including any personal loans. But banks stand in the way of this by including early repayment penalties in their loans which put people off from doing the right thing. We think that is fundamentally wrong.”

With spring time only just around the corner, it seems that many home owners in the UK get the urge to make home improvements on their property, whether that is simply a case of getting a few cans of paint to re decorate, or more major projects ,such as a new bathroom, kitchen or even building an extension on their home.

For many people undertaking some improvements, it will be necessary to obtain a home improvement loan of some kind to help fund the work and choosing the right loan for the job can be as difficult as choosing the right colour paint or the correct floor tiles.

For smaller projects, an unsecured loan could be the best solution. These loans are flexible and easy to arrange and can normally be taken for terms of up to around five years. There are some particularly cheap loan deals available at the moment, particularly for loans of between £7,500 and £15,000. Unsecured loans are also suitable for someone with very little equity in their home.

For those with more equity remaining, or for borrowers who have a less than perfect credit history, a secured loan may be a more suitable option. Secured loans take a second legal charge over the property and are usually for larger amounts of money and can be taken over longer loan terms, often up to 20 years.

A re mortgage, or further advance loan can often work out as a cheap loan deal. Home owner loan products often have some of the lowest loan rates on the market and can incorporate new borrowing with the balance of the existing home owner loan, although they can take some time to arrange.

For those borrowers with a particularly cheap home owner loan deal at the moment, a further advance loan could be the best option, as they could keep the benefits of their existing low loan rate.

If anyone is in any doubt as to which is the best type of loan for their needs, they should consult an independent financial adviser, or loan broker. 
 

The banking giant HSBC has just announced its pre tax profits of £1,547 million for last year, which shows an increase of 17.2 per cent above the figures for the previous twelve months and at the same time has announced its plans to increase the amount it offers in new loans in the coming year.

Over the course of 2011, HSBC offered around £13.2 billion worth of new home owner loans and mortgages, up from £11.77 billion the previous year, which shows an increase of 12.2 per cent in new loans an accounting for around 9.6 per cent of the whole of the home owner loan market in the UK.

Since the credit crunch and financial crisis hit the UK back in 2007, the majority of high street banks and other loan companies have all cut back on their lending activities and become extremely cautious about offering loans to anyone.

However over this same period, HSBC have increased their overall home owner loan lending by more than 75 per cent and the plan is to extend this growth and increase the bank’s market share to around 11 per cent of the home owner loan market by the end of this year.

HSBC has made available £15 billion for this year, which it intends to offer to customers as loans, with around £3 billion set aside especially for first time buyer loans. It is anticipated that this will help around 150,000 home owner loan customers and 27,000 first time buyers.

The bank has not only increased its net lending in the home owner loan and mortgage sector of the market, but has also increased the amount of business loans offered to firms across the UK.

Joe Garner of HSBC said “We remain fully committed to helping the UK economy continue to recover and we will continue to support our customers through the challenges ahead.”

The most recent big mis selling scandal to hit the financial services market in the UK is that of Payment Protection Insurance (PPI), which has been sold alongside a personal loan, credit card or other unsecured credit agreement.

Although claims from loan customers against banks and loan companies regarding their PPI policies have been going on for some time, the scale of the number of claims has accelerated over the last twelve months, after the Financial Services Authority (FSA) won a case in the high court which ordered banks and loan companies to compensate their loan and card customers who had been mis sold PPI.

As a result of this, the number of PPI complaints has rocketed since the ruling in April last year and over the course of last year, banks and other lenders paid out a total amount of £1.9 million to loan customers who complained about a mis sold PPI policy.

PP policies were regularly sold alongside personal loans and credit cards to protect the monthly loan repayments in the event of the borrower being made redundant, or suffering an illness or injury, which can be valuable cover for those who need it.

However, in many cases PPI was sold alongside a loan without the customer’s knowledge, or redundancy cover was sold to a self employed person who could not claim on it anyway, for example.

Despite the volume of claims from loan customers and high level of pay outs on PPI policies, there are calls for the process to be made quicker and the FSA is monitoring banks and other liable firms on their claims handling process.

Richard Lloyd of the consumer group Which? said “Too many people are still finding the claims process too lengthy. The banks must streamline the process to make it easier for people to claim.”

The Office of Fair Trading (OFT) has announced that it is to carry out an extensive review into the pay day loan sector after it has received growing concerns that some pay day loan companies are targeting vulnerable borrowers and taking advantage of those individuals who are desperate for a loan.

The last time the OFT carried out a similar review into pay day loan companies in 2010, 13 loan companies had their consumer credit licences revoked and a further 43 firms surrendered them voluntarily.

Over the course of the past couple of years, the pay day loan industry has grown alarmingly an the OFT believe it is the right time to carry out a further review and try to improve protection for loan customers.

The focus of the OFT investigation will look at those loan companies who offer pay day loans without carrying out adequate financial checks on the borrower to ensure they can afford the loan, as well as those firms who target borrowers with unsuitable or unaffordable loan products.

The OFT will also look at loan firms that “roll over” existing pay day loans into new short term loans and also how they deal with loan customers who get into financial difficulty, as to whether or not they are treating their customers fairly.

The OFT has already checked the websites of many pay day loan companies and intends to visit around 50 individual loan firms as part of the review process.

David Fisher of the OFT said “We are concerned that some pay day lenders are taking advantage of people in financial difficulty, in breach of the Consumer Credit Act and not meeting the standards set out in our guidance on irresponsible lending.”

“This is unacceptable. We will work with the trade bodies to drive up standards but will also not hesitate to take enforcement action, including revoking firms’ licences to operate where necessary.”

Growth in the UK loan industry is particularly slow at the moment and has been for some time, due to the fact that many potential borrowers are unwilling to take out a new loan in the current uncertain economic climate, or are unable to be accepted or a new loan due to tougher lending criteria from loan companies.

One area of the loan market which seems to have broken this trend recently is that of home owner loans and mortgages, which have seen an annual growth rate of 1.3 per cent, according to the latest figures from the British Bankers Association (BBA).

The home owner loan market has continued to outgrow the UK loan market as a whole, which has only seen an annual growth rate of just 0.8 per cent, despite a growing number of cheap loan deals entering the unsecured loans market.

Although people are still taking out new personal loans and credit card deals, a greater number of borrowers are making efforts to repay their existing personal loans and card debts early, which has led to the unsecured loan market actually contracting by around 1.6 per cent over the course of the past twelve months.

Whilst demand for unsecured borrowing, including personal loans, credit cards and overdrafts, has remained low and is likely to do so for some time, the home owner loan market has been the only sector of the loan market to go against this trend, with £8.3 billion worth of new loans in January this year alone.

Although this figure shows an increase of 2.2 per cent above the same period twelve months ago, experts have warned that this could be a false indicator for growth in the housing and home owner loan market, as the bulk of these loans are from first time buyers trying to beat the stamp duty holiday deadline.