Problems arise in secured loans market
It has been reported recently that the secured loans market in the UK is somewhat doomed, with the availability of secured loans becoming more and more rare as a result of falling house prices.
Earlier this month one of the last four remaining providers decided to pull out of the market, adding further speculation that the secured loans market is now on its last legs, at least for the time being.
Since the middle of 2007 no fewer than fourteen lenders have pulled out of the secured lending market, and the most recently one to do this is First National.
There are now just three lenders left in the market that are offering secured loans, and these are Ocean Money, Secure Trust Bank, and Nemo Loans.
Falling profits have resulted in the greater number of lenders leaving this market, even though many cash strapped homeowners are now looking to take out this sort of finance to help them through the difficult financial climate.
Falling house prices have led to increased risk for lenders, and because lenders have to take a certain minimum level of equity in order to provide a secured loan has made this type of loan unviable for many homeowners who have seen their equity levels plummet.
In addition to this, many of those that apply for secured loans tend to have damaged credit histories, and this makes the risk to the lender even greater. Since the onset of the global credit crunch many lenders have become more cautious about lending to those that have tarnished credit histories.
One industry official said: ‘Many lenders have found it is no longer a viable business option to offer secured loans in the current economic climate and we have to wonder for how long the remaining lenders will be able to survive.‘
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