The downturn comes at a time when home owners are choosing to improve their property rather than move house. Second charge mortgages are traditionally used for building extensions or home improvements that can add value to a property or for debt consolidation, which allows consumers to consolidate their existing debts at a lower and more affordable rate of interest.
Fiona Hoyle, head of consumer finance at the FLA, said: "Second mortgage new business fell significantly in 2008 as a result of the difficulties facing companies trying to secure funding in the commercial markets. This has continued into 2009 with our figures showing that FLA members wrote £53 million of new secured loan business in January 2009, compared to just over a third of a billion pounds in January 2008. The change is marked."
Other sectors also showed a weak performance:
• Total finance provided to consumers in the 12 months to January 2009 by FLA members was £59.2bn, down by 10% on the 12 months to January 2008.
• Direct unsecured personal loans fell 28% in the 12 months to January 2009 compared with the previous year.
• New credit card business was down 12 per cent in January compared with January 2008.
