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recession caused the demand, and also the approvals, for mortgages,
remortgages and secured loans to decline dramatically.
Remortgages,
mortgages and secured loans all have much in common, and the
most important thing that they have in common is that they
are all connected in some way to property and the equity on
that property.
Mortgages
are first of all the home loans needed to purchase a property
and as most people move house every few years, the majority
of people will hold several mortgages in the course of a life
time.
People
do sometimes pay cash when buying a home, but these are few
and far between, as very few consumers have savings that would
enable them to purchase a property outright.
The fall
in the value of property caused the demand for mortgages to
decrease, as few people had sufficient confidence in the economy
to consider moving house or taking out a mortgage to become
a homeowner for the first time.
Builders
found it difficult to sell their completed properties and
were forced to reduce their prices.
When a
person takes out a mortgage, they are normally tied in to
the deal for a certain period of time of generally between
two to five years.
There
are heavy penalties when paying a mortgage off during the
tie in period.Early repayment penalties are expensive at from
2% to 5% of the mortgage balance.
When the
tie in mortgage period was complete many motgage payers sought
a remortgage.
A remortgage
is the moving from one provider to another to, as already
mentioned, obtain a better interest rate. However to obtain
a low interest rate there must be equity on the property ,
and because of the drop in property prices, many could no
longer hope to be granted a lower rate of interest and were
therefore compelled to remain with their current mortgage
provider.
Therefore,
for the very same reason as for mortgages, the demand for
a remortgage plumetted due to the property price crash.
Secured
loans suffered a similar fate, and they fell by more than
80%, decimating the number of secured loan lenders and brokers.
Secured
loans are home loans secured on the equity of a property,
and they rank as a second charge behind the first mortgage.
Both remortgages
and secured loans used to be very popular means for homeowners
to release equity to obtain funds that they could use for
a number of puposes from car purchase to funding home improvements,etc.
and were also often used for debt consolidation.
Yet again
however, many homeowners could no longer obtain secured loans,
or homeowner loans which is their alternative name, due to
there being insufficient equity on their property.
The fact
that property values are now going up will yet again mean
that homeowners will have enough equity to apply for remortgages
and secured loans.
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