The UK has one of the most progressive and heavily regulated financial markets in the world, from the trading sector to the provision of loans and credit services to customers across the globe.
The financial market in London has diversified at an incredible pace since the Great Recession, with the emergence of bad credit providers such as Likely Loans having created a wider range of products to suit the changing needs of consumers.
The lending market in the UK is a fluid and constantly evolving entity, however, and one that’s often at the mercy of changing laws and legislation. Below, we’ll look at some of the most recent and upcoming changes in lending law and ask why you need to be aware of them.
1. The Increasing Base Rate
Back in the final quarter of 2017, the Bank of England (BoE) implemented the first increase to the base interest rate for 10 years.
This was followed by a further hike in August of this year, with the rate increasing incrementally to 0.75% across all variable financial products.
Customers with variable rate loans and mortgages will have already felt the impact of this, as their monthly repayments will have immediately increased to absorb the full base rate hike. Despite this, however, banks and building societies are not passing the full interest rate rise on to savers, with some applying a minimal increase of just 0.10% to selected accounts.
You need to factor this into your annual budget and spending plans, while also keeping your eyes peeled for further base rate hikes in 2019 (and particularly post-Brexit).
2. The Potential Takeover of ClearScore by Experian
Recently, it was announced that credit behemoth Experian had agreed to over the progressive market newcomer ClearScore, in a multi-million pound deal that would significantly disrupt the marketplace.
The deal is currently under a Phase 2 investigation by the Competition and Markets Authority (CMA), amid concerns that the acquisition would result in less intense competition and restrict the development of digital products aimed at helping customers to understand their credit scores.
Undoubtedly, such a move would stifle innovation and the level of progression in the market, while creating a diminished range of free and paid services for customers.
This is certainly a space worth watching in the near-term, particularly if you’re planning to buy a house or take out an unsecured loan in the future.
3. The Declining Profitability of Buy-to-Let Properties
The laws surrounding buy-to-let mortgages in the UK are continuing to change, as the government looks to create more transparency in the market and reduce the value of tax breaks available through this investment method.
As a result, the start of the new financial year will see landlords braced for cuts to their bottom line profits, as the government’s mortgage tax relief changes are gradually phased in.
More specifically, the amount of mortgage interest that can be offset against their tax bill will be reduced at this time, restricting the potential profits of landlords across an entire portfolio of British properties.