View more on these topics

Bridgingwatch – Danny Waters – April 2012

As well as bridging, the aim of this column is also to look at the secured loans market.

Secured loans like so many other consumer finance sectors, were decimated by the perfect storm of 2008, with second charge lending getting a particular hiding.

Secured loans went from the sublime to the ridiculous in a matter of months. Even now the market is a shadow of its former self.

At its peak in 2007, for example, the secured loan market was on target to complete more than £6bn of gross lending per annum – some estimate as much as £7bn.

Currently, the market is estimated at just £360m of gross lending, which is roughly 6% of the market’s value at its peak. That’s one huge drop in value.

But things are looking up. The sector is by no means back but it is no doubt on the road to recovery.

Enterprise Finance is seriously long on secured loans. We believe the current market value is artificially low and that the 36 to 48-month outlook for secured lending is attractive, offering unrivalled growth prospects for those savvy enough to enter.

As I see it, the market is being held back by supply, not weakness of demand.

There just aren’t enough competitive lenders to satisfy the appetites of prospective borrowers. But I believe that this is likely to change.

Our internal forecasts suggest the value of secured lending will pass £1bn by 2016.

This growth will be fuelled by an improving macro-economic climate and, just as important, by increased liquidity and appetite from both existing and new entrants.

I believe a number of those new entrants will be lenders already operating in the mortgage and bridging space, which are seeking to diversify to expose themselves to more of the upswing as the economy improves.

A perfect example is Masthaven Bridging Finance, which recently announced its intention to enter the secured loan world, with others rumoured to follow its lead. Launching this spring, Masthaven Secured Loans will be offering second charge loans.

The aim is to enter what it sees as a relatively subdued market and gain market share by offering competitively priced products to clients who are in need of this type of lending.

Good luck to it and to the lender’s new chief operating officer, Stuart Aitken, who will head up Masthaven Secured Loans.

More proof that the sector is picking up steam came when leading secured loans lender, Shawbrook Bank, reduced its rates to 6.9% in March – the lowest level since the good old days of 2007.

It’s a sure-fire sign of a market that is starting to go up through the gears.

Of course, the only potential obstacle to the successful growth of the secured loans industry is the forthcoming changes in the regulatory landscape.

deal makers

  • SHAWBROOK BANK Completed on a £270,000 short-term loan for converting an office in Edinburgh into two residential properties, with the deal brokered by Springmount Finance
  • FINCORP A client wanted to borrow £600,000 secured by a second charge loan on their main residence. Fincorp arranged this and the client completed in 12 days.
  • CHEVAL had a flexible approach on a complex case from Pink Pig Loans. It lent additional funds to cover outstanding debts, with the exit being the sale of the client’s home.

Hot secured loan products

  • Shawbrook Bank’s market-leading interest rate of 6.9% per year.
  • Blemain finance’s large loan product. With loan sizes of up to £500,000 these are the largest Consumer Credit Act regulated loans available.
  • Nemo personal finance’s fee-free deal, with interest rates starting at just 7%.

Recommended

Crackdown should curb number of claims firms

The Association of Mortgage Intermediaries says it expects to see a decline in the number of mortgage-related claims management firms coming to market in the coming year. Last week figures from Ministry of Justice revealed that it closed around one in five firms during the past year and almost doubled the number of MoJ staff […]

Keep calm and carry on?

We British are known for our stiff upper lip and just getting on with things. It’s part of our quirky cultural behaviour – like forming orderly queues, or saying sorry when it’s not our fault. Many of us just aren’t that great at talking about what’s bothering us. But if someone feels that the stresses […]

Newsletter

News and expert analysis straight to your inbox

Sign up