Do Fewer Mortgages Mean Bad Things for the Homeowner Loan?

Michelle Tuvey Michelle Tuvey | Loan Underwriter

Mortgage bankers have been the beneficiaries of increased business for several quarters in a row. Unfortunately, things took a dip at the start of 2017 to the extent that some are wondering if the housing market is going to cool down at the one time of year it's supposed to be heating up. There are also concerns that recent weakness in the mortgage market could mean bad things for the homeowner loan.

The future of mortgages and home loans really depends on one's perspective. Starting with mortgages, there are very good reasons that fewer mortgage approvals were reported during the first quarter of 2017. Some of those reasons are related to weakness in the housing sector, but others are not. It is not a fair assessment to judge the entire mortgage loan industry on the number of people being approved for new mortgages.

Fewer People Applying

A significant factor in the mortgage dip has been fewer people applying for mortgages. Approvals fell by a little more than 1% month-on-month in February, coming in at 68,315 as opposed to January's 69,114. According to a report on the Guardian website, the lower numbers "could be a sign that consumer fears over the economic outlook were weighing on their willingness to push ahead with house purchases."

By the same token, the total volume of consumer credit increased by some £1.4 billion in February. Though that increase is slightly lower than January, overall growth in consumer credit remained steady at 10.5%. What does this tell us? It tells us that people are still utilising credit even though fewer mortgages are being approved. Enter the homeowner loan.

Maintaining Our Spending

The Guardian's research seems to indicate that we are maintaining our spending as consumers despite a softer housing market. People are borrowing from their savings, using credit cards, and even taking out secured loans in order to maintain the kind of lifestyles they want. 

Having said that, some economists believe too many property owners or using credit cards instead of tapping into their equity through secured loans. A little education could change that. This is one of the reasons behind the conclusion that it is not time to panic over the traditional homeowner loan.

Property owners with sufficient equity can use a homeowner loan to raise tens of thousands of pounds for virtually any financing purpose. They don't have to turn to credit cards that carry with them higher interest rates and less favourable terms. Furthermore, a softer housing market has very little impact on the secured homeowner loan market.

Understand Your Position

Given the recent data about credit, mortgages, and the housing market, it might be helpful for you to sit down and assess your situation. How are you doing? If you're planning to borrow in the near future, do you plan to use a secured loan or credit cards? Or perhaps you're thinking about getting your first mortgage.

The point to be made here is that fewer first-time mortgage approvals do not necessarily equate to a credit crunch. There are lots of different reasons the number of first-time mortgages dropped a few months ago. There are numerous reasons the experts believe a softer housing market is inevitable for 2017. But none of those reasons equates to an inability to borrow if you have the income to support a loan.

A secured homeowner loan could be just the thing you need to meet long-term financing goals. Secured loans are certainly recommended over credit cards if the amount of financing needed is more than £5000.

Sources:

Guardian ?? https://www.theguardian.com/business/2017/mar/29/mortgage-approvals-fall-uk-consumers-rely-credit-keep-spending

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