Pre-Coronavirus lockdown lending up 13%

The number of second charge loans agreed in February was 13% higher than the same time last year at 2,435 figures from the Finance and Leasing Association reveal.

However, the data pre-date the covid-19 pandemic hitting the UK and the ensuing lockdown, which put the brakes on the property market.

The volume of loans agreed in February was 9% higher than a year earlier at £107m.

The total number of secured loans agreed over the 12 months to February reached 28,512, an increase of 18% on the previous year.

By value, lending was also 18% higher in the year to February at £1.28bn.

The second charge mortgage market made a positive start to 2020, but the mortgage market faces serve disruption from the impact of the coronavirus on the economy.

Lenders are doing their best to support customers during these unprecedented times, and any customer facing repayment difficulties due to the Coronavirus should contact their lender as soon as possible to discuss the help they need.

Looking to raise funds?

We are living in very strange times and many things are not clear, if you are looking to raise funds as and when this crisis is over it is strongly recommend getting the “ball rolling” sooner rather than later.

All experts are predicting there will be a huge surge of lending applications later in the year, so getting your requirements in place now would be a sensible move.

Like to discuss your lending needs?

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 mortgage, could it help you?

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

Of the minority who were aware what a second charge mortgage was, 28% didn’t understand what the difference between this and a re-mortgage was.

Since April 2017, the second charge market has been 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.

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 substantially over the past 2 years. One thing which is very evident is that consumers have become 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.

Like to discuss your lending needs?

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 market is booming in 2020

Coronavirus – If you are looking to raise funds it is still a good time to start the process and keep “ahead of the game”. We are expecting a very busy period once the restrictions are lifted, therefore making provisions now will speed up the release of funding.

The second-charge lending market used to be a reserve option, used predominantly by near-prime and sub-prime audiences, but it has been transformed by regulatory reforms, product refinement and tighter underwriting.

As a result, it has grown substantially in the past three years

Homeowners looking for lending alternatives

In recent years, consumer awareness of second-charge mortgages has been low, and second-charge lending distribution has been reliant on intermediary referrals.

Following the Mortgage Credit Directive in March 2016, awareness of second-charge mortgages among first-charge brokers and financial advisors has increased.

This has led to a rise in referrals from first-charge brokers – a trend expected to endure as their awareness continues to grow.

Interest rates are far lower.

Historically, interest rates for second-charge mortgages were relatively high and less attractive compared to alternatives, such as re-mortgaging.

The decrease in rates from typically more than 10% in 2015 to around 4% in 2019 as a result of continuing low base rates.

This has made them more attractive and has also made large loans more affordable and accessible to a wider audience.

Rates in the market have decreased to such an extent that they are beginning to converge with first-charge rates, resulting in many consumers topping up with a second charge rather than re-mortgaging the entire sum at a potentially higher rate.

Way forward:

Second charge loans do not suit every need and it’s vitally important any potential borrower seeks professional advice from a qualified adviser. If you would like to discuss a potential loan please do contact one of our fully qualified independent advisers.

Secured lending and the value of professional broker advice

Almost nine in 10 second charge loan applications through an intermediary (broker) resulted in an offer in 2018/19 – up from seven in 10 in 2017. What is more four in five of those offers went to completion, up from seven in 10 the year before.

In particular second charge borrowers have benefited from widely available and competitively priced deals. This is a tribute to the lenders who have expanded their portfolios of loans available to the majority of homeowners.

Lenders remain firmly focused on rigorous affordability tests so that borrowers do not overstretch themselves to achieve their ambitions. Brokers are very positive about future prospects, as two thirds said they were very confident in their own business’ activity for 2020 and beyond.

The rise of lenders willing to help second charge borrowers and greater innovation in the market means more and more borrowers are securing cost effective loans to meet their needs.

If you are looking to take out a loan in the near future, you should keep in mind that interest rates are likely to increase at some stage, especially with the Brexit and current pandemic situation.

Careful consideration should be given to fixing your rate and an independent broker will explain all the pros and cons helping you make the correct choice.

Help required?

If you would like to discuss your lending requirements, please do make contact and one of our independent advisers will be happy to assist.