Slowdown predicted in secure loans market

Demand for secured loans against homes is set to slow down over the next five years, according to a new report.

UK housing market analyst Datamonitor has predicted that although the market for loans secured against property will increase, it will only do so at around 5.3 per cent a year between 2005 and 2009.

Datamonitor also said it was "unlikely" that the double-digit growth seen in the last few years would be repeated in the near future.

The loans, which are secured against the value of the property, are normally used by homeowners to fund higher-cost house modifications such as refitting a kitchen or building a conservatory.

However, there are now fewer homeowners deciding to take this option, as the value of homes has dropped since 2004 with house price growth falling by 17.4 per cent in the last 12 months.

Datamonitor financial analyst Maya Imberg said: "As the UK's housing market slows to a soft landing, the rapid growth rates the secured lending market has enjoyed over the last five years are set to cool."

Recent soaring house prices have encouraged homeowners to borrow more money against their property, but as house price inflation becomes more subdued over the coming months consumer confidence in house prices, and therefore secured loans, is expected to fall accordingly.

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