Brits have already witnessed the extinction of the 100 per cent mortgage as a result of the recession's impact on the banks. Could it be that we will now see the end of secured loans?

What is a secured loan?

A secured loan means that the lender secures the loan against an asset, which is owned by the borrower. The asset is usually the borrower's home. If the borrower fails to reimburse the secured loan, the lender can get its money back by taking possession of that asset.

According to a financial website, opting for a secured loan may not be a good idea, as you have a high risk of losing your home.

But with the recession leaving many Brits with less equity, more lenders are struggling to survive by giving out secured loans.

Lenders axe secured loans

So far, fourteen lenders have axed their secured loan products in less than two years, leaving just three lenders of the loans in the market.

Nemo Personal Loans, Ocean Money and Secure Trust Bank are the only three lenders offering secured loans after the fourteenth lender, First National, pulled out last week.

Furthermore, according to figures from the Finance and Leasing Association, (FLA), new business plummeted by 84 per cent in January this year compared to figures from 2008 as the value of secured loans fell.

Fiona Hoyle, Head of consumer finance at the FLA, stated that the decline in the number of secured loans available was down to "the difficulties facing companies trying to secure funding in the commercial markets."

According to a price comparison website however, the ongoing reductions in property prices have affected the equity available for borrowers who usually opt for secured loans, and this is why lenders are pulling out.

A spokesperson from the website said: "Many lenders have found that it is no longer a viable business option to offer secured loans in the current economic climate and we have to wonder for how long the remaining lenders will be able to survive."

And as lenders continue to question their products, borrowers may find themselves to be in a worse off position.

SVR borrowers to face blow

For borrowers of standard variable rates (SVR), things are expected to get worse, according to the newspaper website timesonline

According to the site, homeowners who have taken out an SVR home loan are more likely to become worse off as millions of borrowers will witness their interest rates soaring when the Bank of England begins to increase the cost of borrowing.

It stated that a homeowner with a £250,000 SVR mortgage could see their repayments climb by £900 a month or more at a time when the base rate increases to 5 per cent.

The move could then leave more homeowners struggling for cash and so consumer confidence may then fall again, leading to an increase in the number of home repossessions, which may again affect house prices causing yet another "downward spiral of tighter credit."