Cheap loans which have started to appear on the market are thought to be one of the reasons why total lending to individuals increased by £1.3billion in October, figures released by the Bank of England have shown.
Within that total it was secured loans which led the way for the increase, with a £1billion increase in October, five times more than the increase in September.
With cheap secured loans giving homeowners the opportunity to borrow large sums of money over a long period of time, the public are starting to borrow money again, for investments such as home improvements. The rise shows that the general public are starting to believe we are leaving the dark days of recession behind.
The advantage of a secured loan for the bank is that they have an asset to fall back on if the client fails to repay their loan, in the form of the client’s property.
With the secured loans marker starting to show signs of recovery, the number of people applying for mortgages and remortgages stayed roughly the same, and with stricter lending criteria, the banks seem reluctant to extend their lending generosity in the direction of the housing market at this time.
The recovery in secured loans could trigger an increase in lending from the banks, which can only be good news for small businesses, first timer buyers and the economy.