The Bank of England has announced that in a recent survey, a number of building societies and banks in the UK have expressed an intention of tightening up on non-mortgage loans and lending to households in the final quarter of 2014. In the same survey, it was revealed that the amount of unsecured credit available to households had been reduced in the third quarter. This same period saw the criteria with respect to obtaining credit cards and unsecured loans had been strengthened.
As is usually the case with financial matters, there will be a difference of opinion about these issues. Some people will think that this is a brave and important move because it will reduce the risk of people taking out credit that they don’t need. However, if you require finance, you may find that the new criteria which make the process more challenging will not be in your favour. This means that many people will have personal reasons to be displeased about the changes to finance options that are available to people.
There has been a change in mortgage options
Given that lenders expect the level of unsecured lending in the UK to fall once again in the fourth quarter of 2017, this is clearly a trend to look out for. In Q3 of 2016, it was found that the largest cut with respect to availability of unsecured loans since Q3 of 2009 had occurred. There was also a drop in the proportion of approval for unsecured credit applications, and Bank of England sources have said this was a significant drop.
When it comes to the different between secured and unsecured loans, it would be fair to say that unsecured loans are a riskier prospect. A secured loan has an asset in place, which means that the lender knows that it loan payments are not made in full, they have an opportunity to seize something that will help them to regain the [[[money]]]. There is no denying that this is a very risky situation for the borrower because if you lose your home you may lose everything but the secured nature of this loan means that the APR will be lower and you will have a smaller amount of money to pay back each month.
Concerns are present for over-extension in the UK market
At this point in time, there are genuine concerns that many households in the United Kingdom run the risk of over-extending themselves. There is a lot of speculation regarding interest rates and many experts believe that interest rates are set to rise in the near future. When you take on board the fact that the current interest rate, of 0.25%, is at a record low, this cannot be seen to being the biggest surprise. However, even with some prior warning regarding the possible change in interest rates, a change will still cause issues for many people.
The Bank of England survey was undertaken in August and September of 2017 and it is part of the Bank’s on-going role to maintain sustainability. Another finding from this study was that the available of [[[mortgages]]] increased by a small amount in the quarter leading to September 2017. This will seem like good news but again, there will be limitations and factors to consider. This is due to the fact that lenders are keen to attract borrowers who can provide a deposit of 25% or more.
Yes, this is clearly a situation that lenders would like to be in but you can see that the vast majority of mortgage applicants are not going to be in that position. The size of the deposit has long been an issue for many people when looking for a mortgage, and this news isn’t going to impact on too many people.
No matter what your current needs are or what you want to achieve with your finances, it is always good to know what your options are. It may be that you will need a helping hand when it comes to managing your finances and this is why a guarantor loan or some form of affordable loan may make a difference. Like all loans, there are risks associated with guarantor loans but if you take the time to find a loan that you are comfortable with, you should be able to move forward effectively.
With tighter controls on lending, you may need to think long and heard about what you do next with your finances.
BIO: Andrew Reilly is a freelance writer with a focus on news stories and consumer interest articles. He has been writing professionally for 9 years but has been writing for as long as he can care to remember. When Andrew isn’t sat behind a laptop or researching a story, he will be found watching a gig or a game of football.
