It was encouraging to read recently that the confidence of UK consumers has reached its highest level in more than 15 years.
The GfK consumer index jumped six points in June, taking the overall score to seven – a level not seen since the late 1990s. The latest figures show that UK consumers appear to be enjoying the security and stability of a resurgent economy.
The growing confidence can be attributed to a number of favourable factors, including low inflation, falling unemployment and, finally, real wage growth.
This, according to the research behind the index, has led to a jump in the number of people believing that now is a good time to make major spending decisions.
In fact, latest Bank of England data showed that outstanding unsecured consumer credit balances increased by £1bn in May, taking the three-month annualised growth rate to 8.5%, the highest figure recorded since August 2005.
One result of this growing consumer confidence is that a certain section of the population in a better financial position are more likely to spend money on lifestyle improvements. This frequently leads to an increased appetite for borrowing.
I believe this will drive a greater demand for financial intermediaries to provide their customers with the relevant information, knowledge and suitable advice that will allow them to make an informed choice about all their borrowing needs.
Despite the energised spring in the step of the UK economy, there are many who are still feeling the pain from overleveraging themselves before the financial crash in 2008. This view is backed by a recent report by PwC which found that the average UK household will owe close to £10,000 in debts such as personal loans, credit cards and overdrafts by the end of 2016.
With interest rates expected to begin rising back towards a more “normal” level during 2016, it’s clear that a household’s ability to service their debt is going to come under increasing pressure in the next few years.
Many who have overstretched themselves will need good advice on how best to restructure their finances.
Secured borrowing is an option available to people who are looking to consolidate their finances into a manageable monthly loan and reduce their monthly payments. The key to providing responsible advice and educating customers is to help them adjust their behaviour after they have restructured so they do not find themselves having to do the same again.
With this in mind, and as second mortgages will fall within the rules and regulations of the Mortgage Credit Directive from April next year, second mortgage brokers and lenders are now engaging better with financial intermediaries to educate them on the benefits of secured loans.
Embracing education is key, and will enable advisors to talk with confidence about second mortgages to their clients, including how they can leverage equity from their home if there is a need to restructure their finances.
By offering a wider base of products and services, an adviser can ensure they recommend a financial option that matches the needs of their customer in the short term while taking into consideration their longer term objectives.
Taking this approach will strengthen and grow client relationships, and allow financial intermediaries to operate effectively across a more diverse borrowing market.