Loans -
Credit Crunch Hits Borrowers Harder - 14/03/2008
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A data made available on price comparison website Moneyfacts.co.uk says the current credit crisis is continuing to hit retail loans market, further making it harder to take out loans.
It reports a further shrink in the sub-prime mortgage, while rates on personal steadily rise.
A number of sub-prime lenders like Amber Homeloans, Scarborough Specialist and SALT, have recently stopped new lending. Also crisis-hit Northern Rock said it will not offer any sub-prime loans funded by Southern Pacific Mortgage.
Further compounding the crisis, the cost of unsecured loans continues to rise. The report said average loan rates are now up to 4.6 per cent higher than what they were last year. Smaller loans, it said, now suffer the most severe increases.
It said the highest rate on loans of 1, 000 to 2,999 pounds has shot to 27.9 per cent up from the 19.9 per cent that is charged on loans from Mark and Spencer Money, Sainsbury’s Bank and Britannia Building Society early last year.
Moneyfacts analyst, Michele Slade said the current crisis has seen institutions focusing on getting money in the door and getting more expensive and selective when lending out money.
Anyone trying to take out a loan this year, said Slade, will be forced to pay more in the form of monthly repayment than they would have paid in the last two years.
The number of lenders offering sub-prime mortgages has also fallen from 32 last year to 20 this year.
Also, the number of mortgage products available to creditors with adverse credits histories has shrunk from 6, 501 to 1, 867 – a 71 per cent fall.
Moneyfacts analyst Julia Harris describes the latest withdrawal as a second phase of tightening.
She said lenders are accepting the reality that things won’t get better in the near future.
“In fact, it seems that there is more blood on the carpet yet to be spilt,” she said.
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