There have been positive developments in the second charge market, argues Dave Pinnington, business development director, V Loans
We don’t want to get ahead of ourselves, but the green shoots so often talked about in hope rather than reality by the current government might actually be starting to show. Now maybe I might be getting a little too carried away with the good weather we are at last enjoying, but apart from the feeling that things are beginning to turn, the evidence is also looking a little more substantial. From the increase in lenders looking to enter the market and those, like Link Loans, that already have, to the announcement from a large estate agency group that asking prices for property are being achieved and that house prices in general are not only steady but are increasing, is good news for all of us.
To counter that burst of optimism however, it does not take much to unsettle our brave new world, does it? The latest is what used to be called an Act of God in the shape of the Icelandic volcano whose name is unpronounceable. Currently responsible for bringing the air traffic of Western Europe to a complete standstill, the joke doing the rounds that amused me was the concern that with so many executives of different UK companies stranded abroad, if the crisis continues will their employers actually miss them that much?
On a serious note though, Act of God or not, a little grit in the atmosphere could well have a lagging effect on our return from the recession as it will hit an already fragile economy. If you add in concern over the allegations against Goldman Sachs by the SEC then, while I always try to look on the bright side, there is always something that comes along just when you think that events are taking a turn for the better.
In the secured loans market and here at V Loans, we are seeing plenty of activity from clients and their advisers who are looking to not just consolidate but many more who are actively seeking to raise capital for anything from holidays to car purchase. Moreover, while there is a greater restriction on LTVs than at the height of the boom, clients are demonstrating that they have plenty of equity with which to help Mr Brown ride out the recession on a wave of consumer spending. New reports suggest that UK consumers are actually paying down debt accumulated over the boom rather than consolidating, which seems to have surprised many pundits. Certainly, we are still receiving many enquiries for consolidation, but I would like to think that there is an underlying strength at the individual end of the economy, which suggests that the public have taken on board that now is a good time to put their houses in order. I think the only reason this was newsworthy was because the considered opinion was that there were no real savings that individuals could call on to make the repayments. Nice to see the pundits wrong again.
I have been asked about the news that the FSA is likely to take over regulation of the secured loans market and what did I think. Frankly, it has to be a good thing. For a start it puts the secured loans market on the same step as the rest of the residential lending industry and while the OFT and subsequent changes to the law on secured loans have meant that customers were already well served in terms of consumer protection, there is no doubt that this will mean that the rump of intermediaries who have held out against offering secured loans will no longer have a reason not to participate.
While we are on the subject, I do wonder what the FSA is going to make of an industry that unlike its first charge cousin makes no charge to the client for valuation or legals. I await the inevitable consultation with interest. No doubt thought might well be given to standardise the sales process but I really wonder if the advantages that the customer enjoys at the moment, such as the mandatory cooling off period, the one month standard redemption penalty and the fee free nature of the application process, will still be intact after consultation. Frankly, I think that intermediaries and particularly their clients might not be so keen to see these advantages lost, just to produce a more homogenised process common to all residential type lending.Watch this space…