Secured loans are becoming a thing of the past as more lenders pull out of the market.
Secured loans, or second mortgages, as many know them by, were a popular way of borrowing larger amounts up until the credit crunch started to bite.
This form of borrowing is rapidly fading away as more lenders withdraw schemes or pull out of the market altogether.
Following hot on the heals of lenders such as iGroup, and First Plus, First National, owned by GE Money, are the latest lenders to withdraw their secured loan products.
First National will close their doors on 2nd April. They intend to “hibernate” until credit becomes more available and house prices start to recover.
The falling house prices hits the secured loan market particularly hard as this type of lending uses equity in property as security against the loan.
As prices fall, the difference between the value of the house and the outstanding mortgage diminishes leaving little equity available to act as security against large borrowings.
The lack of credit that is generally available is also hurting the second mortgage industry. Banks are just not lending, and credit is drying up as a result.
So if you need to borrow larger amounts, say to build an extension or other home improvements, then this news that yet another lender is shutting its doors is not going to be welcome.
The situation is bound to improve in time, as the credit crisis gradually recedes and house prices slowly recover, however it is likely to be at least twelve months before that happens.