Credit crunch causes problems in loans market
The loan and mortgage market is continuing to suffer problems as a result of the global credit crunch that swept across the UK last year, making it difficult for consumers to get affordable deals on loans and mortgages in many cases. The availability of sub-prime mortgages for those with bad credit has declined significantly over recent months, with far fewer sub-prime mortgages now on the market from lenders.
Consumers have also seen the interest rates on personal loans rising, and this is despite the fact that there have been two interest rate cuts in the past few months, one in December and one in February. Industry professionals have stated that there has been a reduction in the number of lenders offering sub-prime mortgages, which has fallen from 32 to 20. They have also stated that consumers are having to fork out more for personal loans as a result of higher interest rates.
Those with bad credit face particularly severe issues, as the number of mortgage loan products available to this group has dropped by over 70% recently, with just 1867 products available compared to the previous figure of 6501. One industry professional said: “The latest withdrawals from the market have come in what appears to be a second phase of tightening. Lenders are facing up to the reality that things are not going to get better in the near future: in fact, it seems that there is more blood on the carpet yet to be spilt. Although growing numbers of borrowers are set to slip into sub-prime status, the market shows no signs of being able to satisfy this heightened demand.”
Many experts have predicted that the effects of the credit crunch will continue to cause turmoil in the financial markets over the course of this year, even though a number of further rate cuts have been predicted for 2008.
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