Banks Shy From Unsecured Credit

by Stewart Douglas

Story link: Banks Shy From Unsecured Credit

The number of retail lenders offering unsecured personal loan products in the UK market has decreased according to a report released today by research house Moneyfacts, in a move branded as ‘worrying’ in terms of overall market trend shifts.

In the report released today by Moneyfacts the number of lenders providing unsecured short term finance had fallen dramatically, by upto 10% over the course of November, reflecting a growing trend in the market to move away from riskier forms of consumer lending.

Several institutions including Eskimo Loans, Hanley Economic, GE Money and LV= have all withdrawn their unsecured lending products, amidst growing risk adversity derived from the credit crunch of the summer, which has spread throughout the UK and international banking markets.

Additionally, Moneyfacts attributed growing defaults on loans and mortgages and increasing interest rates over the last year as significant factors in the retraction from unsecured lending, which it said was vital to the stability of a healthy domestic consumer finance marketplace, and the economy on the whole.

In similar statistics published by watchdog Uswitch, 38% of new credit credit applications over the course of the last quarter were rejected - substantially higher than the norm, whilst 19% of personal loan applications over the same time period were also rejected outright, which is also thought to be reflective of the current market trends disclosed today.

Speaking today on the results, Esther James from Moneyfacts said the market trend away from unsecured credit was alarming.  “Such a large reduction in just the last month is worrying.  With no signs of rate rises slowing, it’s a rather unsettled market. The credit crunch is showing its strength in the personal loan market”.