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07 September 2010

Rob Derry, managing director of secured finance packager, Brunel Mortgages & Loans, is calling on the broker sector to gain a better understanding of how secured loans can solve problems for remortgage customers in the current challenging trading conditions. He says: “The latest FSA figures show that remortgages have dropped to 38% of the mortgage market from 60% in 2008/9, which proves that getting a remortgage is increasingly difficult. Uncertainty over the future level of interest rates has also deterred brokers from recommending fixed rate deals which are substantially higher than traditional SVR levels of Bank Base Rate + 2%. At the same time, there has been an obvious lack of funds for secured loans in the last three years. “However, funds are now becoming available in the secured loans market with lenders competing with each other for business. Secured Loans offer a real opportunity for customers to raise finance and there is a great place for brokers in this market as some of the best deals are only available through intermediaries.” Link Loans is a key member of Brunel’s lender panel. David Johnson, Link Loans’ Chief Executive, comments: “Secured loans are an established product typically used for home improvements and other significant purchases, such as a car or wedding, or debt consolidation. After a period of severe supply constraint the market has started to improve once more. At the same time demand is also set to build as structural changes in the mortgage market bite and consumers continue their shift to home improvements as house moves remain subdued. When combined with the refinance potential that exists with the current level of credit card and unsecured lending, the opportunity for intermediaries is once again starting to look appealing.” Rob Derry explains: ”If a customer had a £150k mortgage at 1.5% over base they would be paying about £635 a month on a 25 year repayment mortgage. If they wanted to raise capital to improve their home, fixed rates will be around 4% depending on LTV and other factors. They would be looking at a payment on £165k (assuming £15k capital raise) at about £870 per month. This same amount could be raised on a secured loan for less than £160 per month, saving about £75 per month. The savings are increased if they have an Early Repayment Charge on their first mortgage. “If remortgage applicants are self-employed their choices are limited, and if they’ve got a slight bit of adverse credit in the last two years, choices are limited even further if not removed completely. Secured loans offer products to many more customers than the select band who qualify for a remortgage today and if borrowers wish to consolidate their secured loan and mortgage at a future date when funds are more available and rates stabilise, there is no ERC on the secured loan. “It is essential for brokers to raise their awareness of the problem-solving potential of secured loans if they wish to increase their business levels and offer the best service to their clients.” Contacts for brokers: Brunel Mortgages and Loans: 01793 612266, www.brunelmortgages.co.uk Link Loans: 0845 257 2266, www.linkloans.co.uk

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