[Report] UK Secured Personal Loans Market Research, Trends, Analysis TOC

Overview
- Catalyst
- Summary
Executive Summary
- Market Focus
  - Secured personal loans are secured against a borrower' s property
    - Secured personal loans are generally taken out by customers with existing mortgages
  - The UK secured personal loans market performed well in 2006
    - After a difficult year in 2005, the market turned a corner in 2006
    - Sub-prime lending accounted for over a third of loans advanced in 2006
  - A strong housing market was key to the market' s turnaround in 2006
  - Yet a number of products continue to compete against secured personal loans
  - In fact, the market is now at a crossroads in its development
- Competitor Focus
  - The market is made up of two types of player
  - Specialist lenders dominate, but there will be greater involvement from mainstream lenders
    - Halifax, Picture Financial and GE Money Home Lending lead the market
    - Moreover, the market is becoming more competitive
    - But a number of lenders have withdrawn from the market amid the global credit crunch
  - On the distribution side, brokers nevertheless control the market
    - Intermediaries continue to account for the vast majority of loan originations
  - Lenders must therefore understand intermediaries in order to maximize business
- Market Forecast
  - Datamonitor believes that the secured personal loans market portrays an encouraging future
    - Under the Datamonitor View scenario, the secured personal loans market will reach £10.2 billion in 2011
  - Conclusions
Table of Contents
Table of figures
Table of tables
Market Focus
- Secured personal loans are secured against a borrower' s property
  - Secured personal loans are generally taken out by customers with existing mortgages
- The UK secured personal loans market performed well in 2006
  - After a difficult year in 2005, the market turned a corner in 2006
    - The latest figures from the FLA suggest the market has continued to do well into 2007
  - Sub-prime lending accounted for over a third of loans advanced in 2006
  - Still, the secured personal loans market remains small compared to other lending markets
- A strong housing market was key to the market' s turnaround in 2006
  - Resurgent house price growth acted as a stimulus to the market
    - House price growth has been strong so far in 2007, which will boost the secured personal loans market
  - Because secured loans are used as a debt consolidation tool, unsecured debt is also a driver of the market
  - Other macroeconomic factors have contributed to the market' s performance
    - GDP growth picked up in 2006
    - Successive increases in the base rate have encouraged more consumers to consolidate their loans
    - Unemployment remains low
    - UK consumer spending improved during 2006
- Yet a number of products continue to compete against secured personal loans
  - Remortgaging and further advances are major competitors of secured personal loans
  - Flexible mortgages are an increasingly competitive threat
  - Unsecured personal loans continue to be a strong competitor
    - Yet unsecured personal loans may become less competitive in an environment of rising interest rates
  - IVAs and DMPs are a small competitive threat
    - Greater education is necessary to ensure consumers take out these plans for the right reasons
- In fact, the market is now at a crossroads in its development
  - The market' s reputation is gradually improving
  - Impending regulatory change awaits and will have significant effects on the market
    - The market is regulated by the OFT, whereas the mortgage market is regulated by the FSA
    - In a positive step forward, all secured loans will be regulated by the OFT from April 2008
    - Yet the changes in early settlement charges that favor customers constrain lenders
    - European regulation could mean the market may become regulated by the FSA, but this is still some way off
    - The industry is awaiting the outcome of the Competition Commission' s investigation into PPI
  - In addition, a new association was created to represent brokers in the market
Competitor Focus
- The market is made up of two types of player
- Specialist lenders dominate, but there will be greater involvement from mainstream lenders
  - Halifax, Picture Financial and GE Money Home Lending lead the market
  - Some mainstream lenders, including Halifax, have pulled out of the market in recent years
    - Halifax' s exit will greatly affect the market
  - Yet Datamonitor believes that a number of mainstream lenders will enter the market over the next couple of years
    - Alliance & Leicester entered the market to capitalize on unsuccessful unsecured personal loan applicants
    - But lenders will need to ensure they do not cannibalize their other product offerings
  - There are now more lenders in the market than ever before
    - Advantage entered the market in June 2007
    - Breeze Loans entered the market in October 2006
    - Some investment banks have also entered the lending space
  - Moreover, the market is becoming more competitive
    - Price competition has increased as a result of the large number of competitors in the market
    - The intermediary channel in particular has become more competitive for lenders
    - Aggressive advertising continues to be a method of customer acquisition, although it has decreased
    - Innovation is nonetheless still lagging behind price in terms of importance and development
  - But a number of lenders have withdrawn from the market amid the global credit crunch
    - Kensington Personal Loans entered the market in 2006, but has since withdrawn temporarily
    - GMAC-RFC has abandoned its plans to enter the secured personal loans market in April 2008
    - Lehman Brothers closed down LMC and SPPL as it intends on a global restructure
- On the distribution side, brokers nevertheless control the market
  - Intermediaries continue to account for the vast majority of loan originations
    - The market' s historical non-standard and small nature are key to the high participation by brokers
  - Brokers that advertise the most tend to be the market leaders in the intermediary channel
    - Many brokers reduced their advertising expenditure over 2006
  - A number of changes are occurring within the intermediary market as competition intensifies
    - All types of Intermediaries are becoming more involved in the secured personal loans market
    - Some brokerages nevertheless have fared less well
    - A significant number of large brokerages have been bought up in recent years
- Lenders must therefore understand intermediaries in order to maximize business
  - Competitive pricing and product suitability are most important to intermediaries when choosing a lender
    - Quick decisions on a loan application have become more important to intermediaries since last year
    - A wide lending criteria has also become more important to intermediaries since last year
    - Fees and commissions paid to intermediaries are the least important factors for intermediaries
  - Brokers can be tempted to choose other lenders by better pricing and faster turnarounds
Market Forecast
- Datamonitor' s forecasts consist of three different scenarios
  - Datamonitor uses three different scenarios of the UK economy
  - Datamonitor' s bespoke forecasting model also considers drivers specific to secured personal loans
- Datamonitor believes the secured personal loans market portrays an encouraging future
  - Under the Datamonitor View scenario, the secured personal loans market will reach £10.2 billion in 2011
- Conclusions
APPENDIX
- Supplementary data
- Definitions
  - Bank of England base rate
  - Balances outstanding
  - CAGR
  - CCJ
  - First charge mortgages
  - Flexible mortgage
  - Gross advances
  - Individual voluntary arrangement (IVA)
  - Loan term
  - Loan-to-value (LTV)
  - Non-standard
  - Remortgaging
  - Secured personal loan/second charge mortgage
  - Unsecured personal loan
- Methodology
- Forecasting methodology
- Further reading
- Ask the analyst
- Datamonitor consulting
- Disclaimer
- List of Tables
  - Table 1: Top nine lenders by secured personal loans advertising spend, 2005-06
  - Table 2: Share of secured personal loans advertising spend by medium, 2002-06
  - Table 3: Value and proportion of secured personal loans arranged directly and indirectly, 2006
  - Table 4: Top ten brokers by secured personal loans advertising spend, 2005-06 (£)
  - Table 5: Economic forecasts used in Datamonitor' s forecasting model, 2006-11
  - Table 6: Secured personal loan gross advances under the three forecast scenarios, 2002-11 (£m)
  - Table 7: Secured personal loans gross advances and annual house price growth, 1997-2006
  - Table 8: Market shares of the leading lenders in the secured personal loans market, 2006
  - Table 9: Average secured personal loans price differential between the average typical APR and the Bank of England base rate, August 2003-August 2007 (%)
  - Table 10: How important are the following features in your choice of number one lender?
  - Table 11: How important are the following in tempting you to offer another competitor' s loans more often?
  - Table 12: Secured personal loans advertising spend by media, 2002-06 (£m)
- List of Figures
  - Figure 1: The secured personal loans market performed well in 2006
  - Figure 2: Halifax, Picture Financial and GE Money Home Lending lead the secured personal loans market in terms of gross advances in 2006
  - Figure 3: In terms of distribution, intermediaries accounted for over 65 per cent of all secured personal loan gross advances in 2006
  - Figure 4: In Datamonitor' s View, the secured personal loans market portrays an encouraging future to 2011
  - Figure 5: The secured personal loans market performed well in 2006
  - Figure 6: Sub-prime lending accounted for a sizeable proportion of secured personal loan gross advances in 2006
  - Figure 7: The significant rise in house prices in the last 10 years has been crucial to the growth of the secured personal loans market, 1997-2006
  - Figure 8: Halifax, Picture Financial and GE Money Home Lending led the secured personal loans market in terms of gross advances in 2006
  - Figure 9: An increasing number of lenders have entered the market in the last few years
  - Figure 10: Secured personal loan price competition has increased in the last five years, stressed by falling price differential between the average typical APR and Bank of England base rate
  - Figure 11: Of lenders, Picture Financial was the biggest spender on secured personal loans advertising in 2006
  - Figure 12: Direct mail remains the most dominant form of secured personal loan advertising, 2002-06
  - Figure 13: In terms of distribution, intermediaries accounted for over 65 per cent of all secured personal loan gross advances in 2006
  - Figure 14: Of brokers, Capital One was the top spender on secured personal loans advertising in 2006
  - Figure 15: Competitive pricing and product suitability are most important to intermediaries when choosing their number one lender
  - Figure 16: The opportunity to offer better pricing and a faster turnaround are the main incentives for intermediaries to look at new lenders
  - Figure 17: In Datamonitor' s View, the secured personal loans market portrays an encouraging future to 2011

UK Secured Personal Loans 2007 (Segment Report)

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