The secured loan sector is still being viewed as a viable and lucrative sector, argues Guy Garrard, head of business development at Tiuta
In times gone by (the editor might appreciate this) ‘niche’ was a real buzz word within the intermediary mortgage market and products sitting within these niche boundaries swiftly rose to the forefront of many brokers’ attentions. As we are in the midst of a flurry of activity surrounding the bridging finance sector, in terms of new entrants eyeing and entering the market, it seems that the secured loans sector has also started to awaken from its relative slumber.
When prominent names such as Kensington plant the seeds for a possible return to the market then it is certainly time to sit up and take note. If this does happen it will certainly provide a much needed confidence boost to this sector. Secured loans have generated a good degree of interest in recent weeks and months. We have seen the launch of new secured loan lender Portal Portfolio which allows borrowers to simultaneously invest in a pension fund and obtain a secured loan. Y3S also recently launched its ‘Lifestyle’ loan and Link Loans was another new entrant in 2010.
While demand has been relatively constant throughout the darker periods it appears that supply has now started to improve which in turn is working to encourage specialist loan brokers to start investing in marketing strategies and infrastructure. Indeed, it has also been reported that Robert Owen, former chief executive of secured loan lender White Label Lending, is in the final throes of agreeing funding for a new secured loan lender to be named Chambers Harris and hopes to launch in 2011.
As such there are some signs of growing momentum but for a market that at its height was worth £6 billion a year and now resides at somewhere in the region of £300 million, it’s an understatement to suggest that there is still some way to go. Recent figures from the Finance & Leasing Association don’t make particularly good reading. The figures report that secured loan business fell 11% in September compared to the same period last year, amounting to just £24 million. The data also goes on to say the high street has been hardest hit by the decline in consumer spending, with credit and store card spending having fallen by 8% and 22% respectively. Instalment credit spending fell by 23%. But it has to be remembered that we are still suffering from consumers taking a cautious approach to spending and the amount of credit available still resides at relatively low levels.
However, this fall in business levels does not appear to have deterred new entrants from looking to launch and the message gleaned from this is that in many eyes this still remains a sector with great potential. With tight criteria and funding restrictions still evident in the more mainstream market there is no question that demand will remain strong for secured loans. Having said this we have to hope that any new entrants will have the backing, appetite and innovative nature to stretch themselves beyond the prime end of the market as this is becoming somewhat of a saturated area. And, as was even the case at the height of the market, one of the main challenges is to make brokers and borrowers fully aware of the benefits attached to this market and tackle any lingering negative perceptions.
Of course none of these are easy, especially amidst the challenges constantly being thrown up by current economic conditions, and inevitably they will take time to overcome. So for the moment let’s embrace some of the confidence that is entering the market and hope that this can be built upon throughout 2011.
