There have been many changes to the underwriting criteria of the secured loan companies over the past few months according to some of my broker contacts, who have advised me that it is becoming increasingly difficult to get secured loans agreed.

Many of the lenders which previously went after this business are now either concerned about the continued falls in prices or do not have the money to lend. Therefore this has led to a change in the policies which many of the lenders have adopted with most secured loan lenders only offering facilities to consumers with a loan to value (i.e. Mortgage against value of home) of around 70-75%. 

This hubpage will discuss the market in more detail.

House Prices

-          With loans being secured against property house prices play a significant part in the secured loan marketplace, as if consumers equity in their properties is being eroded due to a falling housing market then it becomes increasingly difficult to secure further funding against properties. However, in some areas of the UK the housing market has seen small improvements in recent months, with house prices increasing by as much as 2.6% in May according to Halifax.

-          This recent stimulation of the market could incentivise lenders to increase the level of secured loans which are being approved. This data is not readily available, however it is fair to expect the levels of secured loans to have at least reduced in line with mortgage approvals if not even more.

Liquidity

-          The whole financial services industry has in some way been affected by the shortage of liquidity, and this has certainly affected the secure loans marketplace accordingly. There has been a significant reduction in the number of lenders that are prepared to offer secured loans, and those that are prepared to offer such products are charging a comparative premium for them. From the lenders perspective, long-term wholesale money is expensive, and therefore loans that span 7+ years will seem expensive compared to interest rates.

Confidence

-          The signs are there that there is increasing consumer confidence across the nation. This is seen firstly in the slightly improved housing market, with slightly increased prices, levels of mortgage approvals increasing and also the requirement to move house will potentially act as a stimulus for this as many families have held off moving until the market has improved.

-          There has been a slight increase in the level of enquiries according to some of the secured loan brokers, and they certainly consider that the market will really begin to get going in the next 6 months.

Therefore if you do have a requirement for some funds, you have equity in your and your credit rating hasn’t taken too much of a pounding, you should be ok. Although it is probably fair to say that the underwriting criteria of secured loans will have changed somewhat, and the required levels of equity will have increased.