Unsecured Loan Availability Still Very Low
Last year was a dreadful year for the loan industry in general, as well as anyone looking for a new loan of any kind, whether this was a secured loan or an unsecured loan.
The effects of the credit crunch and banking crisis caused lenders to tighten their lending criteria and struggle with their own wholesale funding issued to be able to offer loans in the first place. Although there was an increase in activity in the secured loan market, particularly for house purchase, towards the end of the year, the unsecured loan market is still struggling, with the number of available unsecured loan still extremely low and showing no signs of recovering.
The news comes from the Bank of England’s most recent credit conditions survey, which shows that the availability of unsecured loans has actually fallen in the last three months leading up to Christmas, even though the number of available secured loans has increased, particularly in the high loan to value area, offering loans to value in excess of 75 per cent.
The majority of lenders have said that they expect to see a continued improvement in the secured loan market, largely due to the continued increase in house prices, however they are not as optimistic about the unsecured loan market, with most expecting numbers to remain low.
A spokesman for the Bank of England said “Demand for secured lending for house purchase had risen over the past three months, while demand for household unsecured credit and corporate credit had weakened. This was the third consecutive quarter in which demand for house purchase had increased contrary to lenders’ expectations. In contrast, demand for remortgaging was reported to have fallen in 2009 quarter 4.
Lenders expected diminished demand for buy to let mortgages over the next three months but broadly stable demand for all other types of household secured lending. In the unsecured lending arena, a number of lenders reported a diminished appetite for risk and market share, as a cause of reduced availability, fuelled by lower demand for unsecured credit.”
