Gary Bailey, Director at Blemain Group, Comments On Secured Loans

The secured loans industry has undergone significant change over the past few years. The market has seen considerable contraction, with many of the bigger names exiting the market in 2008 and 2009 after finding themselves unable to offer secured loans as their funding evaporated.

The regulatory changes in the mortgage market have been many and far-reaching, and the changes are only set to continue as we wait to see the full impact of the MMR and the outcome of the Secured Lending Reform Bill. In its efforts to avoid a repeat of the housing crash, the FSA has been accused of over-regulation and stifling the recovery of both the mortgage and secured loans market. But the reality is that we are living in a different world than that of 2009 and earlier, and lenders must now look to adapt and innovate, bearing in mind the market demands, in order to survive and grow.

Rumours abound that a number of well-known names will return to the market in 2011. Already, we have seen a handful of newcomers or re-entrants to the industry, and those with the greatest potential seem to be the players with strong funding structures or with the aim of addressing certain niche sections of the market. The greatest challenge facing brokers will be that the potential myriad of 'new' lenders will opt to address the new layer of customers that would previously have been seen as prime.

Of course, more lenders is great news for brokers and the market, as the new lending landscape presents them with a range of competitive new products to offer to their customers. However, the volume of customers in this space represents a relatively small segment of most brokers' portfolios, which means they could find themselves placing the same amount of business across a broader spread of lenders.

The danger for lenders is that this is an incredibly competitive space and may well be stalled if they cannot differentiate and offer something new and competitive. Those lenders that recognise opportunities and innovate to meet the changing demand will help to grow the market and provide a sustainable portfolio of products for brokers.

The industry must cater for the needs of the remaining traditional customers and recognise that 'creditworthy' doesn't necessarily mean that a client must have a perfect credit history. In times of recession, everyone has the potential to suffer a credit record discrepancy. To see market-wide recovery in the secured loans sector, lenders need to be prepared to recognise other 'creditworthy' customers with sustainable affordability, to ensure that potential clients are not left by the wayside.

Ultimately, by servicing the demands of these customers prudently, the market will once again broaden, and niche elements will help to create growth for those who are prepared to stand out from the crowd with appropriate products.