| Secured
loans, which are also known as homeowner loans, were a very
popular way for property owners to borrow.
The start
of the secured loan was about thirty years ago at which time
the only lenders of any note were FNB and Cedar Holdings.
Over the
years, other loan providers entered the market , some to stay
and others to exit almost as quickly as they had sprang up.
Eventually,
the secured loan market
stabilised and there was a steady number of lenders providing
this financial product. There were over twenty homeowner loan
lenders doing brisk business for a number of years.
Homeowners
were only too happy to apply for these loans which had low
interest rates and could be used for a vast variety of purposes
Secured
loans are secured on the equity of the property, and originally
homeowner loans were only available up to a maximum of 90%.
As property
values soared so did the equity, and before long several lenders
were not only advancing 100% LTV loans but loans at 125%.
These
125% secured loans were available from First Plus, Paragon
and EPF. The former two lenders are no longer trading, while
the latter is ticking over, granting further advances to existing
customers.
In the
past there were more than twenty secured loan lenders, but
this decreased to less than a handful.
Those
who remained in business, not only restricted the equity margin,
but also their underwriting in general, and therefore the
number of homeowners eligible for secured loans fell, as property
prices on which these loans depend, went down.
The self
employed, who before the recession could obtain a homeowner
loan at up to 90% on a self declaration of earnings, were
affected to a greater extent than the employed.
The loan
to value was set at a maximum of 70% and full accounts were
now required.
It all
looked very bleak, that is until now, when fresh hope has
appeared.
Link Loans,
who withdrew from the homeowner loan market due to their inability
to obtain funds from their backers, Barclays Bank, are back
in business and funded now by RBS.
Secured
loans are available at 70% for self employed people and 80%
for employed applicants.
Self certifications
are now available from Link Loans but the borrower has to
provide proof of a certain level of earnings by providing
bank statements for a three month period.
Further
improvement for the secured loan sector is now being witnessed
by Link Loans reducing their interest rates in a statement
announced by them today.
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