Tag Archives: secured loans

secured loans

Banks, Debts, Financial, Financial Information, Financial Services, Home Equity, Interest Rate, Loans, Money, Mortgage, Personal Finance

Are Secured Loans Improving As A Secured Loans Lender Reenters The Market?

Champion Finance, the Glasgow based finance broker, who have been arranging homeowner loans throughout the whole of the UK for twenty six years, now feel that a new glimmer of hope is being witnessed after what has been a very bleak time for the once so buoyant secured loans industry.

During the recession secured loans fell to less than 20% of their position at the start of 2007. Household names such as First Plus ceased trading. By the beginning of 2010 there was less than a handful of secured loan lenders compared to more than twenty before the recession.

Many homeowners who could have benefitted from these products especially for such purposes as debt consolidation could not obtain the homeowner loans they wanted The self employed were especially adversely affected as self certification of income was completely abolished for those requiring a mortgage or a remortgage and two years fully audited accounts are now required by mortgage lenders.

The good news is that Champion Finance can now offer homeowner loans to self employed without accounts, provided that they have been trading for at least six months, can provide three months bank statements and have a maximum LTV of 60% in their property. This is thanks to Link Loans reentering the secured loans sector and offering these loans through respected intermediaries such as Champion Finance who in addition to being in a position to offer a mortgage and a remortgage from the whole of the market also provide debt advice. Link Loans are now strongly funded by RBS and their reappearance must surely indicate the long awaited resurrection of homeowner secured loans.

Via EPR Network
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Banks, Financial, Interest Rate, Loans, Money

There are reasons the recent base rate cuts have not led loan providers to slash the interest charged on secured loans, as financial solutions provider Think Money points out

Following the recent spate of rate cuts, financial solutions provider Think Money raised a few points about the secured loans market.

Melanie Taylor, Head of Corporate Relations at Think Money: “In just three months, the Bank of England’s base rate dropped from 5% to just 1.5%, prompting substantial changes in the mortgage market – but not in the secured loans market. Many people have questioned this: if mortgage lenders can lower their rates, they ask, why are loans providers seemingly unwilling or unable to do the same?

“The answer lies in the differences between the mortgage market and the secured loan market. Both deal with secured credit and so depend heavily on trends in the housing market as well as the availability of credit, but the two markets are fundamentally different.

“First – and perhaps foremost – a secured loan is a second charge. If a property ends up being repossessed, repayment of the first charge (the mortgage) will always take priority over repayment of the second charge. So from the lender’s perspective, a secured loan is simply more risky than a mortgage – and greater risk has always been accompanied by higher interest charges.”

Committed to the principles of treating customers fairly, lenders will enter into possession proceedings only as a last resort, but the ‘second charge’ issue is still very much a factor in today’s economic climate, with the Council of Mortgage Lenders predicting 75,000 repossessions this year, and no clear indication of when we’ll see a recovery in the housing market.

“Second, it’s clear that the Government’s initiatives aimed at keeping people in their homes are focusing on mortgages, not secured loans. Government help is welcome, as it could help homeowners and limit the damage to the housing market, but this focus on mortgages does add to the difference between mortgages and secured loans, in terms of risk to the lender.”

At the same time, the secured loans market is being adversely affected by the same issues currently plaguing the mortgage market – primarily, the shortage of wholesale funding and the ongoing drop in property prices.

“It’s a common misconception that the base rate dictates the cost of wholesale credit, but this is simply not the case. As the Council of Mortgage Lenders has stated: ‘the cost of funds to lenders depends not on Bank rate, but on a range of other factors, including what they have to pay savers to attract deposits, how much it costs them to borrow in money markets, and the costs of holding capital and sufficient liquidity’.

“Falling house prices, meanwhile, have made lenders much more cautious about granting either secured loans or mortgages. Most analysts seem to expect prices to bottom out after falling another 10% or so this year, but there’s no guarantee this will happen, or that the subsequent recovery in prices will be either immediate or rapid.

This explains why most lenders are reluctant to offer mortgages or secured loans which would leave the homeowner with less than 20% equity. After all, a property worth £200,000 today could be worth £150,000 this time next year. It’s a worrying thought for the homeowner, but also for the lender, who might find a portion of their loan isn’t actually secured against anything – at least, not until property prices rise again.”

Think Money specialises in finding secured loans for people with all kinds of financial backgrounds. If you are thinking about getting a secured loan – or looking for loan advice – contact one of our expert loan advisers today.

Via EPR Network
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Banks, Financial, Financial Services, Home Equity, Interest Rate, Investment, Loans, Money, Mortgage

Despite the economic gloom, Wednesday’s base rate cut could stimulate the economy – and it does hint that the Monetary Policy Committee sees the threat of inflation as lessening, says financial solutions provider Think Money

Responding to the half-point cut to the Bank of England’s base rate, financial solutions company Think Money welcomed its already noticeable impact, and pointed to the implied likelihood of future cuts.

“There’s no question that we’re facing extraordinary issues today, both globally and nationally,” a Think Money spokesperson commented. “As a company, we were pleased to see the Bank of England taking this step – not just dropping the base rate, but dropping it by a substantial amount.

“Furthermore, we’re delighted to see major mortgage providers passing that reduction on to consumers. After so many months of negative news, this could make a big difference to many homeowners’ financial circumstances, as their variable rate mortgages drop from 7% to 6.5%.”

Anyone with a tracker mortgage, meanwhile, is sure to enjoy lower payments at once: The Times predicts immediate benefits for around 4 million people paying home loans that track the Bank’s base rate. ‘Those with a £150,000 mortgage’, it reports, ‘will see their interest-only repayments fall by £63 a month’.

“The same goes for other kinds of credit,” the spokesperson continued, “from secured loans to credit cards: people with tracker deals will certainly profit from the cut, and borrowers with SVR deals will be following their lenders’ reactions closely.”

New fixed-rate loans could also drop in price. “Now that the cost of credit has come down, lenders will be able to pass the savings on, giving their customers a better deal without placing their own profits in jeopardy – something which could have a profound impact on their stability at a time like this.

“Looking beyond the actual cut,” the spokesperson stressed, “it’s equally important to consider the implications – not just what the deal means, but what it says about the Bank of England’s assessment of our economy. First, the cut reveals how seriously it is taking today’s financial troubles. Second, it implies that the Bank is feeling more comfortable about inflation.”

As stated in the Bank’s news release about the rate cut: ‘The recent intensification of the financial crisis has augmented the downside risks to growth and thus has diminished further the upside risks to price stability’.

“In other words, today’s financial crisis has become more of a threat to the nation’s GDP – but on the plus side, slowing growth does tend to slow inflation too. The Bank may well have liked to postpone the base rate cut until inflation came down closer to the 2% target, but given the choice between letting the economy deteriorate and losing some ground in the fight against inflation, it chose the latter.”

As for the months ahead: “The latest BRC-Nielsen Shop Price Index (SPI) for the UK reveals that annual shop price inflation shrank to 3.6% in September, down from 3.8% in August. It’s encouraging to see inflation on the way down, particularly as it gives the MPC more leeway when it comes to future base rate decisions. Various influential bodies are calling for the Bank to make further cuts to the base rate – and there’s reason to hope it’ll be able to do that.”

Via EPR Network
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Banks, Financial, Financial Services, Financial Solutions, Home Equity, Insurance, Loans, Money, Mortgage

Secured consolidation loans are still a viable debt solution

In the midst of the credit crunch, thinkmoney.com reminds existing and potential customers that secured consolidation loans are still a viable debt solution for many homeowners – and that a range of alternative debt solutions are available to borrowers who either can’t secure a loan against their property or prefer not to.

“There’s no question that obtaining secured credit has become harder and, in many cases, more expensive,” a spokesperson for the financial solutions company commented. “As a second charge on a home, a secured loan involves a certain risk from a lender’s perspective, so secured lenders are keeping a very close eye on issues in the housing market. A recent Bank of England survey revealed that default rates on secured lending rose by more than expected in Q2, and lenders expect these rates to rise further in the months ahead.

From the individual borrower’s perspective, equity withdrawal of any kind is clearly a more attractive option when house prices are rising: “Today’s falling prices are reducing the number of homeowners with enough equity to make a secured loan a viable solution – and deterring many who are keen to retain their ‘safety margin’ against negative equity.

“Having said that, it’s important to see recent falls in house prices in their correct context: as relatively small drops following a decade of rapid growth. According to Nationwide’s House Price Index, for example, the ‘average house’ in Q2 2008 was still worth almost £10,000 more than it was in Q2 2006. In just ten years, Nationwide reports, the average house price rose from £60,754 to £184,131 – homeowners may be worried about falling prices, but many are still likely to own significant levels of equity. For them, a secured loan can be an excellent debt solution: a realistic way to consolidate their unsecured debts into one manageable, lower-interest debt which they can arrange to repay at an affordable rate.

“Nonetheless, when major secured loans providers like Firstplus announce they’re ceasing to make new loans, it’s clear that the secured loans market as a whole is suffering under today’s adverse conditions. With lenders tightening their criteria or even turning down new business, it’s more important than ever that borrowers choose a company that works with a wide range of lenders and specialises in finding secured loans for people from all kinds of financial backgrounds. Talking to the right company can make all the difference between being offered credit at a competitive rate and being unable to avail a secured loan at all.”

Concluding, the thinkmoney.com spokesperson stressed that secured consolidation loans are by no mean the only way out of debt. “Depending on the individual’s circumstances, a number of other debt solutions may be more appropriate than a secured loan, such as a debt management plan, an unsecured debt consolidation loan, an IVA (Individual Voluntary Arrangement) or, for residents of Scotland, a Trust Deed. For anyone in debt, the important thing is to seek impartial debt advice from a company that offers a wide range of debt solutions – a company that has an in-depth understanding of each solution’s benefits and drawbacks and can recommend the one that constitutes their optimal route out of debt.”

Via EPR Network
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