Demand for secured loans rockets

Demand for secured loans has soared in the last six months as mortgage-holders rush to take advantage of lower rates.

According to figures released today by financial comparison website MoneyExpert.com, there has been an 85 per cent increase in homeowner loan applications in the three months ending January 2008 compared with the previous quarter.

Its figures show the average APR on a £15,000 unsecured loan is around 8.44 per cent. However, people with the option of securing their loan against their home can obtain interest rates around 2.5 per cent lower, with some lenders offering 5.9 per cent APRs.

Sean Gardner, chief executive of MoneyExpert.com, said: "Historically secured loans were seen as something of a product last resort. But these days they are far more attractive to homeowners who are looking for a competitive rate of interest."

Mortgage-holders and homeowners considering an unsecured loan should be aware, however, these rates can often come with an arrangement fee of up to £995.

Mr Gardner added: "One thing to be cautious of is lender or broker fees. Some of the headline interest rates may not include fees which would normally not apply on an unsecured loan.

"That said, even with a fee the lower rates available on homeowner loans make them worthy of serious consideration."

MoneyExpert found the majority of secured loan customers were those who had failed to get an unsecured loan. Many were attempting to consolidate debts and perhaps had poor credit records.

Mr Gardner added: "That is not to say a secured loan is inherently bad – home loans can be a lifeline for the applicant, but they should be taken on with a degree of caution."