Second charge lending has soared in the last year

Second charge lending has soared in the last year, with the number of people taking out these specialist mortgages increasing by nearly a quarter.

The value of new business in this area of the mortgage market went up by 23% to £108 million in May 2019, according to new figures from the Finance & Leasing Association (FLA). Meanwhile, the number of new agreements increased by 22%.

The second charge mortgage market remained buoyant in May, as monthly new business reached more than £100 million for the second time this year.”

What are second charge mortgages?

A second charge loan is, quite literally, a second mortgage. It is a loan which is secured against your home in the same way as a standard mortgage. Homeowners can take a second mortgage out with another lender, so can shop around to find the best deal.

The loan can be used a bit like a re-mortgage or personal loan to raise additional money for things like home improvements.

Commonly they are used by people who are already on a good rate and don’t want to re-mortgage away from this to raise money.

Others use it to avoid paying early repayment charges associated with re-mortgaging or because they have experienced credit problems and may therefore find switching to a new deal tricky.

May’s increase in second charge lending marks the ninth consecutive month of new business growth.

Back in April the FLA reported a 24% rise in new second mortgages.

Need help?

If you are considering taking out a new loan against your property please get in touch with one of our fully qualified advisers who will be happy to guide you.

The great British DIY season is with us

Almost half of homeowners (49%) are planning a home improvement project before Christmas, according to recent research. Each homeowner on average will spend £4,339 from their savings pot to pay for it.

Almost a quarter of people making home improvements are planning to draw on their savings (22%) with the remainder borrowing to fund the work.

A total in excess of £30bn is set to be spent on DIY projects in the next few months alone.

Most popular

Decorating is the most favoured DIY job, with 41% of homeowners planning to get the paint brushes out before December arrives.

A savvy 18% of respondents are taking advantage of gardeners being quiet and commissioning landscaping projects to get their garden in shape for 2020.

And for 12% of respondents, upgrading the kitchen is the top priority, even if it adds to the domestic chaos during the summer months.

Fund raising

Using a second charge loan is likely to offer better rates of interest as the loan is secured on your property. Unsecured loans from high street banks and other sources can be notoriously expensive, we have all seen the rates charged by the so called “pay day” lenders.

The reason for a secured loan being more cost effective is due to the lender having to assess the risk. If you are a high-risk borrower they will need to offset the risk with higher interest rates. So, if you offer security, then the risk involved is much lower and the lender will offer far better rates.

This is indeed particularly useful for those special groups such as the self-employed, retired or those who have had past credit problems.

Why choose a second charge loan?

  • Faster to complete than a traditional re-mortgage.
  • Normally less fees.
  • Very attractive interest rates.
  • Loans are very flexible.
  • Ability to retain current mortgage deal if on a low rate.
  • Helps the self-employed

Need some assistance?

If you think this type of loan could assist you in your future planning it is very important to ensure you get the right one to suit you. There are many different lenders offering numerous second charge loans so please do call one of our advisers.

Second charge market remains very busy

The second charge market continued its strong start to the year with its highest level of activity in more than 10 years in March.

According to data from the Finance and Leasing Association (FLA) 2,392 new second charge loans were taken out in March, the most since October 2008.

This was up 31% on March last year and a similar uptick was seen in the value of new business, as that rose 25% to hit £108m for the month.

The data rounds-up a strong first three months of 2019 for the second charge market with January new deals up 18% and the value of business up 12%.

February witnessed even stronger growth, with new agreements rising by 24% and the value of these growing 20% compared to the same month last year.

Strong first quarter

Overall, January to March saw 6,500 deals completed worth £292m, up 25% and 19% respectively on the same period in 2018.

The trend also shows through in the annual figures with 24,812 agreements, up 13%, worth £1.116bn, up 9%, completed in the 12 months to March.

Who can benefit’s from a second charge loan behind the main mortgage?

  • You are in a tie-in period and do not want to pay a large penalty
  • You need funds very quickly
  • You have an interest only mortgage and do not wish to re-mortgage to capital & repayment

Why you might apply for a second charge loan?

  • You wish to consolidate your outstanding loans and credit cards
  • You wish to carry out home improvements
  • You are looking to inject cash into your business
  • You have had adverse credit and wish to speak to a company who will understand your situation
  • You are self-employed and wish to raise finance for one of the above

Can we help?

If you would like more information on how this type of loan could help you please do contact one of our advisers.

Economic uncertainty drives second charge market

Increases in the second charge loan market suggests economic uncertainty is causing more people to improve their current property rather than move.

Data shows there has been an 8.9% increase in people applying for second charge finance in the second half of 2018, when compared to the same time in 2017.

Figures also show that 51% of these second charges were applied for to make home improvements.

In addition, reports show a 9.2% increase in re-mortgage applications in January 2019 compared to the same period last year. This is reinforced by the ONS reporting in their December House Price Index that the rate of increase in UK house prices is 2.1%, the lowest UK annual rate since August 2013.

With an increase in re-mortgage applications, slump in the UK housing market and uncertainty around our economy, this could suggest more people are choosing to improve their current properties – rather than take a potential financial risk of moving.

It could be that Brexit worries are flattening the property market, meaning fewer people are moving and more homeowners are making improvements to their current properties rather than move during a time when it is still unclear how Brexit will affect property prices.

If you are looking to raise funds it’s important to consider a second charge as a solution for a refinancing or home improvement.

Like too know more?

Our independent advisers are fully trained and skilled in all areas of lending so please do contact us to discuss any requirements you may have.

New era for second charge loans

Customers who have unconventional modes of income or employment, or those who are locked into fixed-rate mortgages with prohibitive Early-Repayment Charges who wish to borrow at a higher loan-to-value ratio or protect an existing mortgage rate. These are just a few of the scenarios in which re-mortgaging options can often be unsuitable.

Prior to the introduction of the Mortgage Credit Directive (MCD) in December 2016, low levels of product knowledge and concerns about fees were being cited as some of the primary reasons for the low volumes of business.

However, the introduction of the MCD brought the second charge mortgage sector further into line with its first charge cousin (Main Mortgage).

There have also been moves towards new and previously untapped areas of influence within the market, with growing numbers of buy-to-let landlords using second-charge loans to grow their portfolios or to fund improvements on existing properties, combined with a comparable rise in the number of customers using loans to consolidate debt.

Indeed, many people within the industry now believe that the uncertainties of a volatile Brexit and the rise in the number of adverse-credit lending scenarios are driving enquiries upwards.

There has also been a significant uptick in cases involving home improvements where customers have been referred for a second charge mortgage as a cheaper option than re-mortgaging.

As we venture ever further into 2019, we can see an industry that is characterised by greater revenue and business streams, wider opportunities, and regulatory safeguards and increased levels of acceptance among both consumers and advisers. In short, the future for second charge loans looks very bright.

Can we assist?

When taking out a new loan you should seek independent professional advice, we have a team of experts waiting to take your inquiry so please do make contact.

Second charge loan applications increasing monthly.

The number of loan applications increased by nearly 23% in the month ending April 2019 compared to the same period last year. There has also been a significant increase in the value of applications for second charges in 2019 compared to 2018.

Our finance director commented, “I’m not surprised at these figures as second charge lending has a lot to offer the homeowner”. “If you compare a secured loan to an unsecured loan these figures are more than justified”. “Interest rates are at an all-time low and the diverse types of loans on offer will fit most needs

Increasingly borrowers are seeking alternative finance when a conventional re-mortgage is not suitable. This could be due to the current mortgage having early redemption penalties or the current loan being on an advantageous interest rate you don’t want to change.

When should you consider second charge lending?

Second charge loans nowadays come in “all shapes and sizes” and there is likely to be one to fit your needs. The crucial thing is to get independent professional advice as there are so many options open to homeowners.

Second charge loans can be used for many reasons, such as a deposit for a new property investment, buy-to-let and re-development of an existing property to name but a few.

Many borrowers now are also viewing second charge loans as a simple and a cost-effective alternative to mainstream lending.

Second charges are fast and can complete in a matter of days as opposed to months on a re-mortgage.

Can we assist?

When taking out a new loan you should seek independent professional advice, we have a team of experts waiting to take your inquiry so please do make contact.

Progressive lending figures

The number of new second charge agreements rose by 31% year-on-year to reach 2,392 in April, the Finance & Leasing Association (FLA) has found.

In April there was £108m worth of new second charge business, up 25% year-on-year.

In the four months to April, the value of new second charge business was £292m, an increase of 19% from the previous year.

In April, the second charge mortgage market reported its highest level of monthly new business volumes since October 2008. It is a competitive and innovative market for consumers and should be taken very seriously if you wish to raise funds using your property as collateral.

In the four months to April, there were 6,500 new second charge agreements, up 25% year-on-year.

Could a second charge loan help you?

There are several reasons why a second charge mortgage might be worth considering:

  • If you’re struggling to get some form of unsecured borrowing, such as a personal loan, perhaps because you’re self-employed.
  • If your credit rating has gone down since taking out your first mortgage, re-mortgaging could mean you end up paying more interest on your entire mortgage, rather than just on the extra amount you want to borrow.
  • If your mortgage has a high early repayment charge, it might be cheaper for you to take out a second charge mortgage rather than to re-mortgage.

Points to consider

Before you decide on a second charge mortgage, it’s a good idea to get advice from a suitably qualified independent mortgage adviser. They will be able to help you find the loan that best meets your needs and financial situation both now and in the longer term. They will have to follow the rules as set out by the FCA when dealing with you. These rules are designed to protect you.

Help required?

If you would like to know more please do make contact and one of our fully qualified independent advisers will be happy to guide you.

Secured lending and you

A second charge mortgage (secured loan) is a loan that allows you to use the equity (difference between what you owe and its value) within your property as security and it effectively sits on top of your existing mortgage. Usually this second loan would be arranged via a different lender to your existing mortgage, there are plenty of specialists in the market place offering various options. On completion of the second charge it then means you will have two mortgages on your home. The main mortgage will always take precedence over the second loan.

Second charge lending is very useful when the homeowner wishes to raise funds and the first mortgage secured on the property has charges to change. This is not always the case and it is highly recommended to seek independent professional advice before you decide the best route to follow.

Second charge loans in the majority of cases will complete much quicker than a re-mortgage which can prove vital in certain circumstances.

There are some very clear benefits a secured loan can offer when used correctly which could well improve your long-term financial prospects. Although consolidating debt is not always the right answer, a secured loan is often a suitable option given the lower interest rate charged when compared to an unsecured loan.

Choosing a loan

This is no easy task as there are so many different options open to the majority of applicants. Be sure you know how much you feel comfortable in repaying each month and seek independent professional advice as to the best loan to suit your needs.

Need some assistance

If you think this type of loan could assist you with your future planning make sure you get the right one to suit your needs. There are many different lenders offering numerous second charge loans so please do call our independent advisers who will be happy to help.

Looking for an affordable loan?

 Second charge loans are widely available through specialist lenders, yet this latest research suggests it’s only the minority of people who explore them as an option when looking at ways to raise money.

Awareness has improved over the last 2 years, but borrowers still are unsure as to the benefits.

Of the minority who were aware what a second charge mortgage was, 30% didn’t understand what the difference between this and a re-mortgage was.

Second charge lending is now regulated by the Financial Conduct Authority, as part of its Mortgage Credit Directive. This means they are now more strictly governed with regards to affordable lending, giving consumers more peace of mind. Previously they fell under the FCA’s consumer credit agreement.

Anybody contemplating taking out a new loan would be well advised to seek independent professional advice as making an incorrect choice could be very costly.

For some borrowers, a second charge mortgage will be a better option than a re-mortgage, so it’s surprising that so many consumers are unaware of what they are and how they work.

There can be several reasons that a second charge might be the preferred option. For example, you may not want to extend the term on your current mortgage, or lose a good rate, particularly if your circumstances have changed or you have an interest-only mortgage that might be difficult to replace.

Demand for this kind of loan, particularly when it comes to funding home improvements has increased over the past 2 years. One thing which is very evident is that consumers are becoming very aware of just how much they are paying for any unsecured loans they may have.

For those thinking of raising money by releasing equity in their properties, it’s important to explore both second charge and re-mortgages.

Can we help?

If you would like to know more about raising funds from the equity within your property do make contact, one of our fully qualified independent advisers will be happy to assist.

 

Second charge lending completing faster than ever before

A recent survey taken from varying types of homeowners clearly shows speed of completion is a very key factor when taking out a new loan. Obviously the costs and interest rates were very high on the list of wants but speed was very important also.

Second charge lending continues to grow in stature month on month as homeowners look for loans at affordable rates. Homeowners are becoming very aware of the costs associated with unsecured lending and the so called “pay day lenders”.

One of the big appeals of a second charge loan is it meets all the surveys key facts such as costs and speed.

On average a second charge loan is completed within 15 working days, this does of course vary dependant on the complexity. 2019 has seen a significant reduction in set up costs plus interest rates are at the lowest ever recorded.

Lenders have seen their market share grow at a rapid rate. They have been quick to recognise the importance of speed in completing a deal as competition increases.

There is little doubt second charge lending has had its most successful year in 2018, the good thing is lenders have taken this on board and reacted positively to meet the challenges.

Need some assistance

If you think this type of loan could assist you with your future planning make sure you get the right one to suit your needs. There are many different lenders offering numerous second charge loans so please do call our advisers who will be happy to help.