Secured Lending Products - UK - January 2009
This report examines the UK market for secured lending products, comprising both further advances and secured or homeowner loans.
The past 18 months have seen unprecedented turmoil in the banking and finance industries of the UK. The secured lending market has been at the heart of this turbulence, hit by the drought in the wholesale lending markets and the fall in the housing market.
Caught between a contraction in lending capacity and the reduced willingness on the part of consumers to borrow money, the secured lending market has been squeezed severely.
However, there are reasons to believe that over the medium-to-long term, secured lending could rise phoenix-like from the ashes of the credit crunch. Secured lending provides the lender with the security to lend in an era of financial conservatism and will offer the borrower lower interest rates in an period when consumers will be more cautious about taking on debt.
This report examines the current state of play in the secured lending market, highlighting the impact of the economic downturn and credit crisis, as well as changes in the consumer environment. Market size is assessed, and placed in the context of competing products. Consumer research also provides an insight into product ownership, motivations for obtaining a secured loan and attitudes towards the market, suggesting new approaches for those marketing secured loan products.
Key report themes:
The secured lending market has contracted significantly in the past year. A combination of economic forces plus the much tighter conditions surrounding the sale of payment protection insurance (a prime profit generator) has cut the legs from under the market.
It seems likely that demand and lending capacity for both mortgage further advances and homeowner loans will stay weak in the next 12 months.
But consumer research for this report indicates that by careful targeting and a new approach to marketing, secured lending could be an important lending product post credit crunch.
By 2010/11, demand should improve, which will create conditions conducive to increased lending capacity: having seen a significant contraction in capacity in 2008, by 2010 some of that capacity is likely to come back into the market.
However, the restrictions on the sale of PPI policies will mean that lenders will much reorganise their business models to base their sales effort and cost structures on an environment in which PPI is no longer the prime profit generator.
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