Difficult Times for Loan Brokers

It's not often that an industry sector has to undergo a wholesale upheaval at short notice, but that is what's going on in the space occupied by loan brokers.

The cirsis experienced by Northern Rock in September 2007 was just the tip of the iceberg, with many other loan and mortgage providers experiencing difficulties with cheap loans being provided to people who should have been charged higher rates to cover the risks they carried.

The restricion of global credit channels has meant that many loan providers have both increased the rates they charge and tightened up their approval criteria at the same time. Many lenders have also reduced the commissions paid to brokers, in an attempt to share the pressure across both customers and brokers. Of course brokers are unhappy with this situation as they are being asked to subsidise cheaper loan deals for customers.

And while this has been happening the ongoing investigation into the selling of PPI by the FSA is putting another pressure on loan providers. PPI is a significant source of income and if this is suddenly reduced, many brokers will be forced to radically change their businesses.

A further worry for loan providers is the reclamation of PPI premiums by customers who feel they have been mis-sold an insurance policy of this type.

The survivors of all this change in the loans industry will be the companies who have a firm handle of their own finances and are prepareed to move quickly to accomodate the new situations as they emerge. These are expected to be the new breed on online loans providers, who have grown up in an era of rapid change and will be better equipped to make adjustments quickly.

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