If this year you are one of many people looking at further borrowing to achieve their financial goals, some changes could be on the horizon. Depending on the type of loan product you are looking for, from mortgages, personal loans, credit cards and more, it’s good to stay informed of what possible changes could happen throughout 2021. Here we’ll look at some of the possible changes to consider.
Consumer Credit To Rise
Many government support recovery schemes that have been in place ended on 31st March, meaning new applications for them are not possible. Those taking advantage of existing schemes such as payment holidays, for example, will also see these come to an end soon or by the end of July, whichever is sooner. This could see an influx of people looking for further borrowing options to help cover essential payments. As people will have their mortgages or rent to pay again after a payment holiday finishes, this could leave little available for any emergencies that can unexpectedly arrive. Payday loans UK lenders and other short term solutions will continue to support those who need cash to cover an unexpected financial emergency, such as home appliance repairs or car maintenance bills.
Mortgage Criteria Could Loosen
Those looking for mortgages could find more attractive products become available, including 95% LTV (Loan to Value) options that would encourage borrowers with smaller deposits. This could see a boom in mortgage lending of £283 billion that could reach levels as high as in 2007. After many lenders withdrew lending of high-risk products back at the beginning of lockdown restrictions from March 2020, it made it much harder to apply for these products. This should now ease thanks to positivity with the recovery roadmap and restrictions being lifted.
Interest Rates Could Rise
Last March, the Bank of England set the base rate at a historic low of 0.1%, something that will inevitably increase this year. In March this year, this was held once again for the 13th month in a row, however by the time of the next BoE review in May 2021, this could start to go up again and continue to do so for a few years. What this could mean for borrowers is higher rates on products from savings to credits cards and loans, so when considering taking out a new application, this will need to be taken into account, although any increases will be rolled out slowly.
Consumers May Continue to Repay Debts
In February 2021, consumer borrowing fell by 9.9% annually as many more people chose to pay back debt rather than take out more. This was the biggest change since 1994 and can be attributed to the continued lockdown measures providing consumers with fewer options to borrow and more focus on what they are already had. Add to this more savings people have built from less travel, working from home, as well as retail and hospitality closures, they need to borrow has reduced. This could continue for the foreseeable future, but once all remaining restrictions are lifted by mid-June, the second half of the year could see a return to more consumer confidence to spend and borrow. What’s certain is it’s very difficult to predict how loans and consumer borrowing may change this year, but the general outlook remains positive for consumers and lenders.