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Secured Lending Increasingly Popular...Borrowers are leaving their credit card at home and opting for a secured loan instead, according to the latest data from money management charity Credit Action. Secured borrowing shot up by £9.6bn during June while unsecured borrowing stalled with a gentle increase of less than £1bn.Many homeowners have taken advantage of rising house prices during recent years to borrow against their property – either by extending their mortgage or taking out a secured loan. The Council of Mortgage Lenders predicted that 2007 would be a bumper year, with banks and building societies expected to lend almost £1 billion against property every day. Today secured lending stands at over £1.31 trillion, accounting for 85% of all UK personal debt, with the average household now owing £96,648 on their mortgage. Taking out a loan secured against your property may be cheaper than borrowing via credit cards, overdrafts or unsecured personal loans, but it’s also more risky, as your lender has the right to take your home if you fall behind with repayments. Moreover although house prices are still rising, the latest research indicates the rate of increase is starting to slow. House prices only rose 0.1% in July, the smallest monthly increase since 2006, according to Nationwide Building Society. Meanwhile credit ratings agency Fitch warned yesterday that the UK Housing Market is 20% over-valued. This could spell trouble for those who have taken out mortgages for more than their house is worth hoping that house prices would rise to fill the gap. London remains the exception, where buying a house will now set you back over £300,000 and annual house price inflation is running at almost 15% despite July’s interest rate increase. But so far it appears that interest rate rises have failed to bite on borrowing. Rates have increased 5 times in the last 12 months, from 4.5% a year ago to 5.75% today whilst over the same period personal debt has grown by 10.2% to £1.34 trillion – that’s £28,600 for every adult living in the UK. We all need to borrow at some point in our lives. However with interest rates set to rise again before the end of the year, it’s worth taking time to make sure that you can afford to borrow before you take the plunge. Why not try online tools such as the budget calculator available through Credit Action’s website at www.moneybasics.co.uk? And if you’re already struggling to keep up with your borrowing – get debt help today.
Adela Read
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