Providers struggle to maintain a selection of cheap loan deals

In order for providers to make loans available to the public, they must first put in place borrowing arrangements for themselves in order to raise the cash used for the loans.

These borrowing arrangements are effectively loans themselves and the amount of interest being charged to the providers has a direct impact on the cost of the loans made to the public. If the provider is able to arrange favourable terms, then it has the chance of offering cheap loans to the public. However if credit rates become expensive, then those higher rates need to be passed onto the public and loan costs increase.

In some situations recently, loan providers have been unable to make any suitable finance arrnagements and have been forced to stop providing certain types of loans altogether.

It is more common now for wholesale borrowing arrangements to come with a range of pre-attached conditions, meaning that lenders can only make loans available to specific types of borrowers and not others.

So cheap rate loans may still be available to certain people, but others will find they are no longer eligible for those loans in the current climate.

The conditions in world financial markets also mean that certain larger loans, for example those secured on property equity are also being restricted and sums that would have been advanced in the past are no longer acceptable. It was not uncommom for people to qualify for loans amounting up to 95% of the equity value of their property, but those levels have been restricted by many lenders, with some even limiting loan sizes to just 50% of equity. That is a factor both of difficulties in credit markets and future predictions of reductions in property values.

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