2nd Charge lending is very popular

When the pandemic took hold last year, a host of second-charge lenders pulled back on their lending. As a result, the market struggled. However, there’s no denying that the second-charge market is now booming. In fact, the latest figures from the Finance & Leasing Association show that in September this year new business agreements jumped by 67% to nearly 2,500, while the value of new lending increased 78% to £102m.

These aren’t one-offs either. In the three months to the end of September, both the number of new second-charge agreements and the value of those deals are up by more than 100% on the same point last year, while on an annual basis they are both up by more than 10%.

There is a pretty clear message there. Not only has the second-charge market bounced back from the challenges of COVID, but it’s also now at pre-pandemic levels. What’s more, the momentum isn’t ending – the FLA said it fully expects new business volumes to grow over the remainder of the year as demand is so solid.

Changing circumstances

There are plenty of different reasons for why the second-charge sector is looking so positive at the moment, but the strength of that demand from borrowers is a significant one.

The last couple of years has had a real impact on the finances of millions of homeowners and making use of the biggest asset they own – their home – in order to correct that makes sense.

It’s no secret that scores of clients have taken on additional forms of debt to get through the pandemic, but now that the economy – and perhaps their personal circumstances – look to be on an upward trajectory, they may want to explore their options for consolidating those debts into a single monthly payment.

Equally, there will be plenty of homeowners who have realised their current home doesn’t quite meet their needs, but they don’t have the appetite – or the funds – to purchase a new one, and so instead want to improve what they already have.

It may be converting an attic to build a new bedroom for a growing family, or perhaps adding an extension which can serve as a home office now that they spend a portion of the week working from home. That sort of home improvement project will likely require some serious funding too.