An overview of different types of lending throughout 2012
Generally 2012 has seen some small improvements with regards to lenders providing more finance in 2012 than they did in 2011. However there is a long way to go with regards to commercial mortgages and residential mortgages. Other methods of finance such as secured loans have seen a more significant growth during the last twelve months, whilst bridging finance has seen lending once again almost double.
The growth in bridging finance is partly due to increased competition within this industry that has made this type of short term funding a more attractive proposition when compared to some of the alternatives. In addition growth has also been due to the flexible lending criteria provided by the bridging providers, which sometimes means that bridging finance is the only available option.
Unattractive mortgage deals means that there is a healthy demand for secured loans. This is because homeowner’s who want to raise large sums of money to carry out home improvements, or perhaps consolidate credit cards and expensive unsecured finance agreements, are put off remortgaging because their existing mortgage facility is a much better deal that they can replace it for. Borrowers who have a mortgage that was taken out before the credit crunch should be very careful about remortgaging because they could well be on a much better deal than they could possibly find today.
Many borrowers think that they should remortgage as soon as their existing discounted or fixed rate deal comes to an end. Before doing so they should carefully check the term of the original mortgage offer because they may well find that after the ‘promotion period’ is over their new rate is based upon a percentage, such as 1%, above base rate. Therefore a 4.99% fixed rate could finish and turn into a 1.5% variable rate! Borrowers are often unaware of this as they don’t check their old agreements and before their existing deal ends and the new low repayment kicks in, they are often contacted by their brokers or lenders who offer a new promotion which they automatically agree to.
The secured loan industry has experienced their best year since 2009. This growth is likely to continue next year, as a secured loan will often prove to be a better option than a remortgage, for people who have a better existing mortgage deal than any new deal that they may be able to find. In addition secured loans offer more flexible underwriting than a mortgage, so can offer a means of raising funds when a homeowner is being turned down for a remortgage.
Mortgages still haven’t changed significantly during the last 12 months. There are some lenders offering mortgages with slightly lower deposits, but the important fact is that significant deposits are still required. Some builders are teaming up with some lenders to offer share ownership schemes, in which the builder provides up to a 30 per cent deposit to buyers, in an attempt to help sales and build more homes.