The liquidity crisis in the UK has affected every aspect of financial services, but in particular the secured loans sector. With pundits suggesting that the secured loans market will be the worst casualty of the credit crunch, the question is, how will the home loans sector bounce back? Or when?
It’s May 2008, the UK is in the thick of the liquidity crisis, the Bank of England are struggling to keep inflation under control due to external influences; as a result they are unable to give the necessary reduction in the UK interest rates that home owners and lenders alike so desperately need. The LIBOR rate (London Interbank Offered Rate) is high; lenders are unable to offer competitive deals without charging ludicrously large fees on top and to cap it all off investors are still wary of the putting their cash into mortgage books as the reprecussions of the US sub-prime disaster continue to hang in the air.
This bleak time has seen most tighten their purse strings and as lenders feel the bite, the first arms of their business that get cut off are the specialist lending arms, in particular secured lending.
The market has just watched Citi Group, one of the worlds largest banks, withdraw its secured loans and specialist mortgage arm, Future Mortgages, from new business altogether and they are not the first.
So where is the secured loans market heading?
GE Money, owners of the secured loan provider I-Group, have confirmed their dedication to the sector, which demonstrates that the market is split. There are the believers and non-believers, those that see opportunity for long term growth in the sector and those that see this time as the opportunity to cut their loses.
The fact of the matter is, the lean will survive…the secured loan companies that have reduced overheads and added other income steams, diversifying temporarily, will inevitably see through the current slump and reap the benefits at the other end. Whether it is another 6 or 36 months before we see the upturn in the UK lending market, the answer is something that no two people in the industry can agree on.
Owning my own secured loan brokerage, I see the upturn coming between 6 and 12 months, perhaps Q2 2009; we have streamlined, cut off the fat and are now focused on future growth which we are certain will return.
£7.5bn worth of secured lending in the UK doesn’t disappear overnight…
Thanks for reading!
CopyRight. 2008 Gary Taylor – Rate Hunter Limited