I'll have a consonant please, Carol, but certainly not a consolidated loan

I'll have a consonant please, Carol, but certainly not a consolidated loan

As the credit squeeze tightens, causing panic among millions of homeowners wondering how they will get a decent mortgage, so the vultures descend. In among the stories that flooded in about banks closing their doors to mortgage customers last week, FirstPlus, the loan company fronted by Carol Vorderman, pictured, sent out a press release suggesting that people might want to consolidate their mounting debts into its low-cost homeowner loan.

The loan apparently has a very tempting rate - 4.9 per cent. After all, where else do you see that kind of figure now? However, it doesn't stay quite as cheap; after three months it reverts to 8.9 per cent. And, more importantly, it's only this cheap because, unlike a personal loan, overdraft or credit card, it is secured against your home, bringing with it the risk of repossession if you default. Even Barclays, the owner of FirstPlus, recognises the risk of people defaulting on such loans, and has twice tried to sell off its subsidiary in an attempt to reduce its exposure to high-risk lending.

For the very disciplined few who also have lots of equity in their home, a secured loan is a possibility. But as the Consumer Credit Counselling Service says, for nine out of 10 people secured loans are a bad idea. Not only are they always more expensive than the headline rate, especially when you add in the payment protection insurance you will have pushed on you, but you have to be absolutely sure that you are disciplined.....continued below

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enough to use the money you get to pay off your other creditors. Thousands of people each year aren't, which is why growing numbers of them are ending up at the doors of Citizens Advice, the CCCS and other debt charities, facing repossession.

At the start of a week that is likely to see more lenders close their doors to new customers and pull their cheap deals out of the market, it is worth emphasising our advice from last week's Cash: it is more important than ever for those who are coming to the end of their deals to remortgage now, rather than playing the 'wait and see' game. Rates won't improve for some time - a drop in the Bank of England base rate is likely to make little difference at the moment - and, as one broker said to me last week, 'dithering is costing people money'.

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