The Financial Services Authority (FSA) are currently responsible for the regulation of most financial services in the UK, such as Pensions, investments Mortgage loans and protection policies and also for authorising and monitoring those brokers and intermediaries who provide such services to the public.

However, one area which is not covered by the FSA is the secured loan industry and the Association of Finance Brokers (AFB) have just issued a white paper on the subject of regulation for secured loans and has called on the loan industry to respond to their comments.

A secured loan is one which is taken out alongside a mortgage and takes a second charge on the home owner’s property after the mortgage loan. This type of loan has become extremely popular, as the level of equity in people’s homes has increased dramatically over the past few years, offering relatively cheap finance compared with other options such as unsecured loans, credit cards and overdrafts.

The white paper from the AFB presents the various options available to the secured loan industry. These options include, remaining under the control of the Office of Fair Trading (OFT) and the Consumer Credit Act (CCA), or opting for full regulation with the FSA, but the AFB has warned the industry that changes in regulation are inevitable and that those involved in the industry should become involved in the decision making process, before their fate is decided by external bodies, such as the Government.

Robert Sinclair of the AFB said “It is vitally important that we take a pro-active approach to regulation of our industry to ensure the best outcome for brokers, lenders and most importantly, consumers. We must put consumers at the heart of any reform and ensure that their needs are served. Consumers and consumer groups are likely to see a move to FSA regulation as positive. An improved perception of second charge lending could lead to increased interest in products and increased awareness of the sector.”

Over the course of the past twelve months the amount and number of new lending decisions from the main high street banks has dropped dramatically, not only on mortgages, but also in other areas such as unsecured personal loans.

The effects of the global credit crunch have meant that even the big lenders have been suffering from liquidity problems, which have been manifested in much tighter and more restrictive lending criteria for those individuals looking for a loan or other finance.

One area which has bucked this trend is loans to small businesses. According to the latest figures from the British Bankers Association (BBA), the level of new lending to businesses from high street banks has risen by 11 per cent over the course of the past twelve months to June this year, with a total amount of £44 billion being granted as business loans.

Over the same period, the total level of business overdrafts also increased to a figure of £9.2 billion, an increase of 3 per cent. Business saving, on the other hand, only grew by 6 per cent over the year, reaching a level of £54.5 billion.

These figures could be taken as a sign that many small businesses are struggling with their finances and are requiring loans to maintain the business, rather than to expand and also that these businesses are using their cash reserves to weather the credit crunch.

David Dooks of the BBA said “Banks are still providing finance to support small businesses in the slowing economy, despite the impact of the credit crunch on lenders. These figures reflect the economic climate for the small business sector, with borrowing continuing to expand, but deposit growth slowing. In the face of weaker trading conditions, businesses are using all the cash they generate, while those seeking finance are generally taking fixed rate structured loans or using previously agreed facilities.”

It’s difficult to know what to believe with regard to stories in the press about the housing, mortgage and homeowner loan markets, there seem to be so many conflicting view points.

Everybody agrees, however, that property prices have generally fallen over the course of the past twelve months and also that it is now harder to obtain finance through a mortgage due to the credit crunch.

The latest survey, compiled by the Centre for Economics and Business Research (CEBR) and conducted by Chestertons estate agents has shown that property prices have dropped across the board over the last month and also the last year.

The amount of reduction over a twelve month period has only been 3.4 per cent, a much lower drop than many experts have stated and predicted for the year. According to the survey, the average price of a house in the UK is now £188,431 compared with £195,192 twelve months ago.

There also seems to be slightly more optimism going forward in the housing and homeowner loan markets. Banks and building societies are slowly starting to return to the market, with one or two lenders bringing out a new range of cheaper loans with more relaxed lending criteria.

There is also talk of a reduction in the Bank of England Base rate of interest before the end of the year, with further cuts to follow through the course of next year and hopefully lenders will pass these savings onto borrowers, making the cost of a mortgage even cheaper.

There is still a high demand for housing in the UK and, due to the factors mentioned above, some of the more optimistic onlookers are even suggesting that we may see the property market starting to recover by the middle of next year, with even the prospect of increasing property prices…now that would be a novelty!!

I know that this may seem like a completely obvious statement, but someone has actually conducted a survey to show that those home owners who have a lower loan to value ratio on their home are in a better financial position when it comes to remortgaging or upsizing property, than someone who has a larger mortgage or homeowner loan against the overall value of their property.

The research comes from the financial website fool.co.uk and shows that those borrowers with a loan to value ratio of 60 per cent, or less have a wider choice of mortgage and loan products.

The survey shows that at 60 per cent loan to value, a homeowner has a choice of 4,588 different mortgage products and for those with an even lower ratio, this number increases to 4,620.

On the other hand, a home owner with 95 per cent loan to value is limited to a total of only 70 products and these are likely to be much more expensive than the lower ratio loans, with higher interest rates and large arrangement fees etc. for someone with a reasonable 75 per cent loan to value, there is a choice of 3,360 mortgage products.

Those individuals who bought their homes more than ten years ago and have not released equity through a re-mortgage, or a secured loan, are in the strongest position, as house prices have grown dramatically over this period and placed many home owners in the position of having a loan to value ratio of 50 per cent, or less, regardless of whether they initially took out a high percentage mortgage or even an interest only loan.

Those home owners wanting to reduce their loan to value ratio have a number of options, which include making additional overpayments on their existing mortgage to reduce the loan amount quicker, or making home improvements to increase the value of the property.

David Kuo of Fool.co.uk said “If proof was ever needed that banks like to lend money to people who need it least, then this is it. Homeowners may want to consider exploiting weakness in the property market to upsize, especially if the amount of equity in their homes will allow them to access mortgage products that others can’t.”

Over the course of the past few years we have seen a number of smaller (and sometimes larger) banks and building societies being swallowed up by larger organisations and this process is continuing with the announcement from the Nationwide, one of the UK’s largest building societies and provider of mortgages and homeowner loans, that it is to merge with both the Derbyshire and the Cheshire building societies.

The move is not being described as a take over, but as a merger, which will be mutually beneficial to all the parties involved, although the names of Derbyshire and Cheshire are likely to disappear.

The merger of the two smaller societies into the Nationwide has been described as “prudent and pre-emptive actions” by the mortgage loan giant and both moves have been made separately by the board of each society, due to each of them facing financial issues following the credit crunch.

The mergers still have to obtain approval from the Financial Services Authority (FSA) and also the Office of Fair Trading (OFT), but if this is granted then both transactions are expected to be completed before the end of the year and will mean that the resulting company will hold assets in excess of £191 billion, placing it in an extremely strong position for the future.

Commenting on the mergers, Graham Beale of the Nationwide said “The core member businesses of both societies are in good shape and have a better future as part of a larger organisation. Nationwide is in a unique position because of its size and financial strength to provide support and we regard it as both responsible and commercially beneficial to undertake these mergers.”

Spokespeople from both the Derbyshire and the Cheshire said that they thought the respective mergers would be of great benefit to their individual members, both savers and those with mortgages and homeowner loans with the societies.