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Secured rates could rise to cover PPI slump

Secured loansBy Guy AnkerThe secured loan market may be forced to increase its rates to pay for the expected payment protection insurance slump.

A report by market analyst firm Mintel predicts that rates will rise as providers seek to make up for losses in business which are expec-ted to follow the FSA’s crackdown on sales methods in the PPI sector.

That view is supported by Promise Finance managing director Steve Walker, who says people buying PPI in the past have been subsidising those who have not taken out policies.

Mintel says demand for secured loans could wane in the current rising interest rate environment. It says this could cause problems for the thousands of brokers expec-ted to enter the market, especially since the creation of the Aifa-backed Association of Finance Brokers last summer.

The Mintel report states: “Any clampdown on PPI could have a major impact on the interest rates offered by providers as present profits from PPI offset the poorer returns from the loans that the PPI policies protect. Mintel estimates the market for secured personal loans to be worth £26.6bn in 2006. Growth in this market will be slow over the next few years as the credit boom seems to have passed its peak.”

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