The market share for secured loans in the U.K. rose 30 percent in 2017 from one year before, bring total revenue to £65.5 million, according to recently released financial data. Lending is Britain’s second largest economic sector, generating £533.3 million per year, down from around £7 billion before the 2008 subprime mortgage market collapse. During that time, many British lenders offering secured loans closed their doors, and several smaller operations were able to fill in the gap. Over the past five or six years, lending has steadily increased as financial institutions are feeling more comfortable taking on bigger risks. Lending has increased in general, and the secured loan market has benefited accordingly.
Noticeable Continued Growth in Secured Lending
Secured loans can be an especially risky endeavor for borrowers as they typically require collateral in the form of a property or vehicle title or some other valuable asset. Banks feel more comfortable lending to borrowers with imperfect credit if there is some assurance that the repayment will be made. The Lending Wizard, a resource that locates secured loans for borrowers on the Web, predicts that, within three years, secured lending will exceed the £1 billion threshold, citing the European Mortgage Credit Directive as the main driver of this growth. Better-informed consumers are also a cause for the increase in responsible borrowing, it said.
The secured lending industry has been making a concerted effort to drive up the market share in their sector by easing lending requirements and reducing rates for inexperienced borrowers or those with poor credit. The lenders Prestige Finance and Shadowbrook reduced their rates to 5.29 percent and 4.99 percent, respectively. This type of competition is another significant factor in the growth of the market. Consumers have a far greater range of options to choose from, and conditions are encouraging them to borrow money for expenditures that they wouldn’t have considered making two years ago.
Any Chance of A Repeat of Booming 2007 Times?
As the secured lending market grows, the rest of the British economy will follow. The hope is that the loosening of the requirements for borrowers won’t create a bubble as in the subprime mortgage market of 2007. Lenders haven’t forgotten that lesson so soon, and they will be paying careful attention to the approvals of loan applications while approving more of them. As more Britons take out loans and make big expenditures, the other sectors in the British economy will benefit accordingly.