The secured loan market has seen steady growth throughout 2022, with business activity even surpassing pre-pandemic levels.
In the latest figures from the Finance & Leasing Association (FLA), 30,849 new secured loans were made in the 12 months to June 2022. This is a 52% change from the previous year.
This upward trend continued into June 2022, as business activity grew by 24% with 2,854 new agreements made.
Although this increase is slightly below previous months, it is still a 29% change from last year and signals that borrowers are still keen to access this solution.
So what could be driving this growth?
The cost of living increasing
It’s no secret that the cost of living increase is squeezing the disposable income of many. So, lots of people will be reflecting on their finances. They may be looking for ways they can reduce monthly outgoings.
One method that is commonly used is debt consolidation, where you can merge all your debts under one single loan. This is achieved by taking out a debt consolidation loan.
By doing this you may be able to get lower interest rates than current loans. Plus, you could have the chance to spread repayments over a longer term. This can help reduce your monthly outgoings. However, it may extend the term of the debt and increase the amount you repay.
Secured loans can be used to help you do this, which may explain the increase in activity we’ve seen.
At this time, there are no visible signs that the cost of living increases will ease. So, it is possible that debt consolidation may continue to fuel demand for this product.
High property prices
Another possible explanation for the continued growth in the market could be related to increasing property prices.
Those who were interested in moving house may have been deterred from doing so until interest rates and house prices stabilise.
In the meantime, they might be looking at ways they can increase their property value before selling, by undertaking home improvements.
Or, they may have decided not to move at all and are instead focused on creating their dream home by undergoing a big renovation project.
In either instance, a secured loan is a common source of funding for those looking to complete home improvements. Therefore, this could explain the continued growth in this market.
Summary
Over 2022 this market has seen continuous growth, which is likely to have been fuelled by cost of living increases and property prices being at an all-time high as outlined above. It’s highly possible that this trend will continue until we start to see things slow down.
Loans are secured against property - Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on a mortgage or any other debt secured on it.
