The value of the UK secured loans market looks set to pass the £10 billion mark in the next five years as more Britons look to consolidate their unsecured debt, according to a recent report issued by Datamonitor.

The current estimated value of the UK secured loans market is put at £7.5 billion, but the report extrapolates that it will grow to a staggering £10.2 billion by the end of 2011. Although the current global credit squeeze as a result of the US sub-prime market collapse is expected to slow the UK loans market initially, it is set to rise substantially over the next five years, and the main driver for the growth in demand for secured loans is debt consolidation. Many more people are using the equity created by recent rises in the value of property to provide the security to pay off their unsecured debt. It is a popular move, as more homeowners prepare for tougher times ahead by taking the time to re-arrange their finances now.

Recent Bank of England base interest rate rises have pushed the cost of mortgages up for a significant number of householders. While a couple of years ago unsecured debt with low interest rates was not such a worry and could be easily serviced alongside lower mortgage repayments, homeowners are now finding that steep increases in the amount they have to pay out each month for their mortgage has squeezed their finances. Add that to the rising cost of unsecured debt, especially on credit card accounts, then taking out a debt consolidation loan to minimise the unsecured debt payment is a good strategy ensuring that personal finances remain affordable.

Another factor affecting the secured loans market is the reduction in buy-to-let activity. As more people take on more than one property secured loans are providing the financial means to fund that activity. The buy-to-let market has been credited by many as one of the reasons why UK house prices remain at their current record high levels, despite five interest rate rises in just over a year. However, recently published figures show that house prices are on the wane, negating any capital growth in the value of buy-to-let property in the short-term, although rents are rising meaning that income is increasing for current buy-to-let participants.

So, despite the current jitters in the stock and financial markets the UK secured loans market looks set to continue its inexorable rise over the next five years, as consumer and market confidence slowly but surely returns.

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