In a recent report, financial advisory firm MoneyFacts explained that seven major lenders have stopped taking applications for new secured loans since July of last year. On the other hand, it was stated that the demand for this type of loan has never been greater. Secured loans give people the flexibility of being able to repay their loans over periods up to 25 years, whereas unsecured loans usually only offer a maximum term of ten years, often less. As such, secured lending has proven particularly popular with people who wish to reduce their monthly outgoings as much as is possible. And with the continuing economic threat of inflation and soaring food, fuel and utility bills, doing so may be beneficial to a growing number of people.



However, the group indicated that a constrained lending environment and falling house prices have had a combined detrimental effect on the buoyancy of the secured loans market. For many firms, offering such products was said to have simply become an unviable business option.

Commenting on the problems facing secured loan providers, MoneyFacts explained: "They face the same funding issues as mortgage lenders and with house prices continuing to fall, lenders can no longer be sure that, if a consumer defaults on their loan, they will have enough equity in their home to repay the debt. If a consumer's home is repossessed, it is likely to be sold at a lower level than market value and once the first charge mortgage is repaid and legal fees etc are deducted, there is likely to be little left for the secured loan lender to recoup the debt owed to them."

The most recent major provider to exit the market is First Plus, which has announced that it will no longer accept secured loans applications from August 2008. MoneyFacts warned that if the current credit conditions have caused one of the UK's largest lenders to discontinue its secured borrowing product, it will be interesting to see how effectively other providers can weather the financial storm. They also said that consumers should be prepared for possibly more major players jumping ship in the near future, with Barclays secured loans services being mentioned as a possible casualty. The group concluded, that lenders that are still active could continue to offer less products, and increase the interest rates charged.

Despite concerns about the overall health of the UK and global economy and a contraction in lending availability, it seems the inclination to spend is continuing. In a recent report published by Sainsbury's Bank, it was suggested that consumer expenditure on discounted items in summer sales could reach 7.89 billion pounds. The firm noted that such a figure amounted to an individual splurge of 305 pounds and 90 pence on items such as clothing, home furnishings and electrical goods.