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Do you expect to see less or more second charge mortgage lenders in 2018?

Secured loans could soar as perfect storm sets in

Mark Dyason

In early November, the base rate was raised for the first time in a decade.

It was some time coming. At the time of the previous hike – way back in July 2007 – Rihanna was dug in at number one with Umbrella.

And, as we edge closer to the end of 2017, you sense a metaphorical brolly could come in handy for many households to protect them from the perfect storm of high inflation and rising interest rates.

It’s against this increasingly hostile backdrop – we believe – that brokers will come into their own and have a more crucial role than ever to play in safeguarding people’s financial positions.

It goes without saying that brokers will be vital in helping households optimise their mortgages, as the interest rate upcycle finally begins. Rates moving north will place a huge emphasis on the need for quality advice.

But they will also be able to provide crucial advice and support for clients seeking to manage the debts they have taken on in recent years.

Debt is almost certain to start nagging at more and more households next year. Numerous reports have been published of late showing how much people have borrowed in the low interest rate environment.

But there’s a problem: data revealed by the latest Bank of England credit conditions survey showed that unsecured lending is tightening up significantly as high street lenders become increasingly cautious.

The survey showed that the availability of unsecured loans fell in the third quarter and, more importantly, is expected to decrease significantly in Q4.

In short, a quick consolidation on to a better unsecured loan rate is not going to be as easy.

For many households seeking to take control of their debt in an affordable manner, it will either be a case of remortgage or – if this isn’t possible or desirable – consider secured loans as an alternative.

Thankfully, the secured loan today is almost unrecognisable from what it was pre-global financial crisis. Rates are much lower on the back of increased competition, there is significantly more transparency and many products have no early repayment charges.

With this in mind, there’s every chance next year could see the number of secured loans double compared to 2017, and brokers will play a key role in ensuring their clients go to the right second charge lender and get the right advice.

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