Much has been said about the expanding trend of the second charge sector over the past year. Brokers and clients alike continue to be surprised at how competitive rates are and how, in certain circumstances, it can make much better financial sense to arrange a second charge mortgage than to re-mortgage a property.
Since the implementation of the Mortgage Credit Directive, there has been a significant increase in lenders entering the sector. These fresh players not only serve to reduce annual interest rates through the increased competition they bring but also add value to the second charge proposition through innovation in their products.
The attempt to align first and second charge mortgages continue and will always be aided by similarity on fees and rates.
For lenders, a second charge, of course, poses a greater risk than a first charge, so there will always be differences between the rates on offer. That said, with the cheapest published rate starting at just a little over 4% and some lenders offering the potential to secure even cheaper rates based on risk, second charges provide a valid alternative for clients looking to raise additional funds against their property.
Range of deals on offer
The Brexit referendum result, coupled with the more potential rises to the Bank of England base rate, means more clients are looking for the security of a fixed rate over a longer term but with the added flexibility to overpay without penalty.
Not so long ago there was not even a fixed-rate option available, with every second charge product at the lender’s standard variable rate. The fact that discounted and fixed rates have been added to product ranges is a testament to the progress of the sector in a relatively short period.
If you are looking to raise funds against your property please make contact and one of our advisers will be happy to assist.