It has been a difficult time for those involved in the personal loan industry over the past couple of years, as well as for anyone who has been in the market for a personal unsecured or secured loan, for whatever purpose.
The effects of the credit crunch and lack of wholesale funding has meant that many loan companies have simply had to close their doors to new business and those lenders which have survived have been limiting their loan products to only the best potential borrowers, increasing the rates they charge on loans and lowering the maximum loan to value allowed on a secured loan, due to the adverse market conditions.
But in a refreshing change (and I mean that in more ways than one!) one loan company is now offering an incentive to anyone who takes out a new secured loan in the run up to Christmas. The secured loan specialist, V Loans, who deal through the loan broker and intermediary markets, is offering a case of wine for every secured loan application which goes through to completion. In addition to this, each loan applicant’s name will be placed in a free prize draw to win a Christmas hamper.
Marie Grundy of V Loans commented on the incentive, she said “In the toughest trading conditions any of us have ever experienced, we thought it would be fun to give something away which will come in useful for Christmas or at least help drown the sorrows in what has been a pretty bad year for all of us. However, at V Loans we are looking at the prospects for a substantially better 2010 and we will be raising our glasses to welcome the New Year as a year of growth and better conditions for all intermediaries and their clients.”
Despite the fact that the Bank of England base rate of interest fell to an all time low rate of just 0.5 per cent in March this year, the majority of banks and building societies have not mirrored this drop in the rates they charge for home owner loans, personal loans and other types of borrowing.
In fact, interest rates on all types of loans have actually continued to increase since March, with borrowers bearing the cost of lenders’ apprehension towards offering loans to individuals. A person applying for a home owner loan at 60 per cent loan to value, for £150,000, would actually now be paying an extra £45 per month above the rate from just six months ago.
But according to new research from Moneyfacts.co.uk, loan rates are slowly starting to fall, although typical rates are still well above the lowest point of earlier this year and there is still along way to go before they come in line with the Bank of England Base rate. However, as conditions in the loan industry start to become easier, several lenders have reduced rates, as well as some also increasing loan to value ratios for borrowers, with some 90 per cent loan to value products beginning to enter the home owner loan market.
Michelle Slade of Moneyfacts.co.uk said “While lenders have made positive steps in reducing rates, more is still needed to counteract the large increases they made in previous months. The cost of funding the products on the swap rate market is lower than it was six months ago, so borrowers will be asking why the banks are taking an increased margin for the same deal. In the last month alone the number of deals available to borrowers with a 10 per cent deposit has increased from 88 to 109, while the total number of mortgages available has moved back over the 1,800 mark for the first time since January 2009.”
UK banks and, in particular those which have been partially privatised with government loans, have been coming under a lot of pressure over recent months from all sides with regard to their reluctance to offer business loans to small companies who are in serious need of finance in order to help the company.
Last week, the man behind the Apprentice and government adviser, Lord Alan Sugar, commented that many small companies only had themselves to blame for not being able to obtain a business loan from their bank, largely on the back of being offered easy loans in the past, thereby leading them to assume that they can still get a similar loan in today’s economic climate.
The Forum of Private Business (FPB) disagreed with Alan Sugar on a number of issues and has launched a free guide which is aimed to provide help to small businesses who are looking for a business loan from their bank. The guide, which is entitled “Get your bank manager to say YES!” is designed to offer help and support to small businesses in need of finance and to provide them with advice on how to go about presenting the best possible case to their bank, in order that they may stand a better chance of being accepted for the business loan they require.
According to the FPB, around 80 per cent of their members have commented that it has become much harder to obtain a loan from their bank over the course of the past twelve months and so the guide is the first in a series to be launched by the FPB to help small businesses survive the current economic conditions and to get the most out of the services available to them. A copy of the free guide is available to download via the FPB’s website.
The effects of the credit crunch and ensuing problems with the housing and home owner loan markets over the course of the past couple of years has not only stopped many first time buyers from getting onto the housing ladder with their first home owner loan or mortgage, but it has also meant that a large number of existing home owners, who would like to be able to move house, have found themselves trapped in their existing properties and unable to take the next step on the ladder, largely due to a lack of finance in one form or another.
The survey from Unbiased.co.uk has found that many home owners have been forced to put their plans to move on hold for the time being. The most common reason for this is that individuals are unable to sell their homes for the price they require or expect, with 24 per cent giving this as the reason.
22 per cent of potential movers claim that they will be unable to afford the repayments on their new home owner loan, despite lower interest rates at the moment and a further 14 per cent are remaining in their existing home as they can not raise sufficient deposit on a new house in order to meet lenders strict lending criteria on reduced loan to value ratios.
Karen Barrett of Unbiased said “Many have relied on their home either as an investment for the future or to help them to move onto the next rung of the housing ladder. However, millions have now realised that their plans have been put on hold by the current state of the property market and they now have to remain in their current house for longer than they had originally planned.
With stricter lending criteria and larger deposits needed in the current environment home buyers should ensure they seek professional advice when it comes to financing their property. It is important that those looking to move get the best possible advice and only a whole of market mortgage adviser has access to the full range of deals on the market.”
Over the past twelve months or so, one of the largest problems for home buyers, particularly first time buyers, has been raising enough funds for a suitable deposit on their purchase, in order to meet lenders’ tightened lending criteria on their home owner loans with particularly low loan to value ratios.
But at last, there is some good news for those struggling to meet the loan to value limits recently imposed by banks and building societies. New research from Moneyfacts has shown that lenders are slowly starting to increase the maximum loan to value they are prepared to offer to potential home buyers.
The research has shown that since March this year, the number of loan products offering a maximum loan to value of 85 per cent has increased from 169 to 231 and the total number of home owner loans offering 90 per cent loan to value has also gone up from 89 to 105.
Although the higher loan to value offerings from lenders has increased since March this year, overall the home owner loan market has seen very little growth, with the total number of available loan deals only increasing from 1,431 to 1,564 over the period, leaving limited choice for potential borrowers who may be looking for a good cheap loan deal.
Although the number of higher loan to value products is increasing slightly, lenders still seem to be extremely reluctant to give much away when it comes to offering new loans and interest rates chargeable on the higher loan to value deals are usually considerably higher than those of lower loan to value deals, as are the initial charges through arrangement fees. Although there has been an increase in the number of higher loan to value products, by the time the borrower has paid the arrangement fee and the higher interest rates, it could be cheaper and simpler to save up a bigger deposit in the first place.
