Secured Loans Hit By Credit Crunch
We have reported on a regular basis, over the course of the past eighteen months or so, on how the homeowner loan or mortgage markets have been affected by the effects of the credit crunch and current economic down turn, but according to a recent report, it is not only mortgage business which has been affected, but also secured loans, or second charge mortgages.
The most recent figures from the Finance and Leasing Association (FLA) have revealed that the total number of new secured loans being offered was 84 per cent lower in January this year, than at the same period twelve months ago.
Secured loans are often used to fund home improvement projects, or as debt consolidation loans to clear up an individual’s unsecured loans and credit card bills at much cheaper interest rates and as such it might be expected that secured loan business would be good this year, as many people look to improve their existing home rather than move house and reduce their monthly outgoings by consolidating existing loans, when money is tight.
However, as with first charge mortgage business, secured loan companies have been hit hard by the economic slow down, with many closing to new business, or being unable to obtain the necessary funding themselves to be able to offer loans to those who need them.
Fiona Hoyle of the FLA said “Second mortgage new business fell significantly in 2008 as a result of the difficulties facing companies trying to secure funding in the commercial markets. This has continued into 2009 with our figures showing that FLA members wrote £53 million of new secured loan business in January 2009, compared to just over a third of a billion pounds in January 2008. The change is marked.”
