Secured Loans and the Credit Crunch

The recent credit crunch has had a major effect on the secured loan market.

Several Lenders have pulled out and many have tightened their criteria, which
means that it is now more difficult to get a secured loan, especially If you
are looking to Self certify and have no proof of income.

There are several reasons for this, as has been widely reported, the American
Market has had major problems with the sub-prime market. This has led to many
banks and institutions having to foreclose on loans made over the last few
years. One of the culprits, it would seem, is the self cert market, with
several authorities suggesting that the loans made, were made without proper
checks on income and affordability. this has led to high levels of debts and
arrears and ultimately foreclosures on an unprecedented level.

The American credit crisis has had a knock on effect in the UK, with several
banks/ lenders within the secured loan market either closing their doors or
tightening their criteria. This is due to the fact that several lenders have
been backed by American / foreign investment companies. For the self employed /
self cert market the situation is worse, because their are now only a few
lenders that offer secured loans to the self cert market and generally only
upto 75% loan to value ( LTV ). There are lenders that will lend to higher LTV
but the criteria can be quite restrictive.

The UK secured loans market is going through a transition, with changes
occurring almost daily, opinions are divided as to the possible outcome, but
general consensus is that the sector will ride the storm and over the next few
months the market will stabilise, and once the confidence has come back into
the market, we should see a relaxing of the criteria and possibly new lenders
entering the market.