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Recent Developments
Of course times are still tough for loan companies in the UK, but a couple of recent events indicate that some promises of positive changes may be starting to happen and a potential recovery situation developing.
Base interest rates were held at 5 per cent this month despite worries that rising inflation figures could have forced a unwanted increase in rates at an unfortunate time. Banks and loan providers are still struggling to raise affordable cash with which to offer new loans and as we reported recently, some loans companies have had to close their doors to new business, at least until things start to improve. An increase in interest rates just now could have made the situation even worse, so the decision to leave rates alone for a further month was a welcome one.
Over recent months we have seen providers of home loans gradually increasing rates and tightening loan qualification criteria, even though base rates remained at a relative low. But over the past two or three weeks we have noticed some of the mainstream providers such as Halifax, Abbey and Nationwide, reviewing there rates downwards. Perhaps wholesale finance conditions are improving and the main lenders are seeing the need to start re-energising the competitive marketplace in which they once operated.
A look at the cheapest loans available for both secured and unsecured borrowing reveals that optimum rates are only around one per cent higher than the best rates available just 12 months ago, so at least one end of the market is still fairly healthy. However it is the other part of the market, where potential borrowers have slightly impaired credit histories or are asking to borrow amounts of money that put them into the higher risk profiles set by the lenders, where we see rates have risen quite markedly in the past year.
The positive signs are a welcome development for the loans market, but there is still a long way to go before we can confidently say that a recovery is under way.
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