Are lenders about to relax borrowing conditions?

Recent figures published by Moneyfacts suggest that lower deposits could be about to return to the mortgage market, proven by a small increase showing in the number of products that are now requiring lower deposits. The implication here is that lending conditions across the board from personal to secured loans could soon follow suit with more competition from lenders offering these types of products.

A potential problem therein lies; the UK and indeed the world is navigating uncharted waters due to the fact that we have never suffered a recession in recent times, particularly not one caused primarily by a collapse in the credit and financial sector as a whole. A severe tightening in lending has subsequently led to a house price crash meaning that more than 1 million homeowners in the UK now face the prospect of negative equity and with house prices continuing to fall, negative equity could face a possible 1.5 million homeowners. The resulting damage to the secured loan market could be catastrophic as secured loan products rely principally on applicants who have positive equity in their homes. In fact some lenders have withdrawn this type of product from the marketplace altogether.

It remains to be seen whether lenders are about to ease borrowing conditions, given the latest data from Moneyfacts, although it is clear that there is a long way to go before house prices recover - something that in turn will reverse the negative equity trend, allowing homeowners to apply for secured loans with confidence once again.

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