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Future of Secured Loans

With the increases in house prices seen during the past five years or so, people have been used to seeing their equity increase at a high rate, and this led to them being more comfortable in taking out secured loans, as with plenty of equity in their homes against which to secure them, they were an attractive prospect for those needing to borrow money.

Over the past five years the popularity of secured loans has risen dramatically, with year-on-year growth in the region of fifty percent, pushing secured loans to a level of £32.6 billion last year.

These high rates of growth in the secured loans sector are set to end however, according to experts in the lending market. With the housing market cooling, and property values seeing only modest rises in most cases, the equity people have in their homes is not growing at the same rate as before. Secured loans require that the borrower have sufficient equity in their home to cover the loaned amount, so having less equity available has an effect on the loans taken.

Not only do rising house prices lead to greater available equity, but they also boost consumer confidence, and if people feel richer they are more likely to be willing to spend and take out loans.

Growth is still expected over the coming years in this sector, however the rate of the growth is expected to be along the lines of five to ten percent per year, which is significantly lower than the fifty percent rises of recent years. Secured loans can offer homeowners large borrowing limits and very competitive rates of interest, so their popularity should continue, albeit at a lesser rate due to wider economic influences.