Second charge lending is forging ahead

Second charge mortgages are becoming a progressively more competitive way for borrowers to raise funds on their existing property, and product innovation means that there are more ways for clients to access a second charge mortgage.

For example, a growing number of landlords are choosing to raise capital with a second charge on a buy-to-let property and there is a growing range of options for clients.

We are also seeing a rise in second charge mortgages that take an equitable charge on the property. With an equitable charge, the lender does not take a legal stake in the property, but instead is given the right for a judicial process of recovery, which means that an equitable charge can be used where the first charge lender declines their consent to a second charge being registered. It even means that equitable charge mortgages are available to clients who have bought their home using a Help to Buy loan.

Therefore, with the growth in the availability and diversity of second charge mortgages, here are four frequent opportunities where a second charge mortgage might just prove to be the most suitable solution for a client.

Low legacy rate or interest-only

There are many borrowers on a lifetime tracker or variable rate that is so low that they would be unable to match their current rate by re-mortgaging. For clients in this situation who want to raise extra money from their property, it can sometimes be more cost-effective to use a second charge loan to borrow the money, rather than shift the entire balance onto a more expensive rate.

Need some assistance?

If you think this form of loan could assist you in your future planning it is particularly important to ensure you get the correct advice. There are many lenders offering numerous second charge loans, please call one of our independent advisers who will be able to guide you in the correct direction.

Second charge loans increasing rapidly

The number of new second charge loans taken out in June was 1,960, up 195% on the same month last year, according to the latest figures from the Finance and Leasing Association (FLA).

The value of second charge business in June was £91m, equating to a 236% increase in value compared to May 2020.

For the three months to April, 5,853 second charge new agreements were arranged, worth £260m.

However, for the full year to June 2021 19,903 new second charge loans were completed, worth a total of £833m, down 24% and 21% respectively.

The second charge mortgage market continued its recovery in June as new business grew for a third consecutive month.  In H1 2021, new business volumes increased by 21% compared with the same period in 2020, and we expect further growth during the second half of this year.”

FLA figures for second charge borrowing in April showed a rise of 176% on the same month last year.

Need some assistance?

If you think this form of loan could assist you in your future planning it is particularly important to ensure you get the correct advice. There are many lenders offering numerous second charge loans, please call one of our independent advisers who will be able to guide you in the correct direction.

Are you self-employed? is borrowing money a problem?

The latest figures from the Office for National Statistics show self-employment is at its highest point since records began over 40 years ago, this means nearly 19% of UK workforce is now self-employed. 

This ever-increasing sector of the UK workforce is probably the most in need of specialist lenders.

A large number of high-street lenders appear not to be interested in them at all as they see them as high risk.

This also applies to not only the self-employed but pretty much any working person in non-standard employment. Regular lenders seem to class this category of the work force as “too difficult” thus the need for specialist lenders. 

If you are self-employed and have a current mortgage a second charge loan could be just the help you are looking for. Second charge loans are fast to complete and far more flexible than any re-mortgage.

A second charge loan offers a quick affordable solution to raising cash secured on your home.  As lending to the self-employed is a specialist market it is recommended to contact an independent broker to get advice as to which loan suits your needs. Independent brokers have access to various lenders who offer very competitive rates in all areas of lending.

One of the many advantages of a second charge loan is it does not affect the first charge mortgage sitting on the property. In this case it makes a second charge a very cost-effective option and can save thousands on exit fees on the first charge mortgage.

Need some help?

If you think this form of loan could assist you in your planning please do get in contact and one of our independent qualified advisers will be happy to guide you in the correct direction.

Second charge loans and consolidating your debt.

Has this pandemic increased your debt?

The coronavirus has left many people financially worse off with debts increasing.

One of the many advantages of debt consolidation is that when done properly it lowers the total amount of interest you are paying. The idea is to consolidate higher interest debts into a single loan with a lower rate. So, the first question to ask is what makes up the bulk of your debt?

If most of what you owe is on high-interest credit cards, you may be a suitable candidate for debt consolidation. Credit card interest rates can run anywhere from 9% to 35% or more. Debt consolidation loans structured as secured loans against property almost always offer significantly lower rates.

Sometimes interest rates and terms are not the two most key factors for debt consolidation. Sometimes the simple matter of needing more money to pay your monthly bills is the priority. So, your next question is whether you absolutely need a lower monthly payment.

Scrutinize your outgoings

Take a look at your budget. If your finances are taken to the brink of disaster every month, you have no room for emergencies or unforeseen expenses. In your case, debt consolidation would also be a good idea if it could substantially lower your monthly outlay. It is better to pay more interest over the long term than face continued problems because you cannot pay monthly bills.

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 professional advice as there are so many options open to homeowners.

Essential, get independent professional advice!

If you are looking to raise funds on the equity within your property please do contact us and one of our independent advisers will be happy to assist.

Second charge loans are proving extremely popular this year!

With lenders offering lower rates and the majority of brokers charging lower fees, today’s second charge borrower has access to a very real alternative to a re-mortgage or further advance.

Figures recently released by the Finance & Leasing Association reveal that second charge mortgage business increased in May by 14.4% in value and 18% in volume, compared with the same period last year. What is more, consumers including landlords are beginning to gain awareness of the second charge option and to understand how it can assist them.

All of that said, a gap in understanding remains, with a recent survey showing that many consumers remained either unaware or cautious of the sector.

Who can benefit taking out a second charge?

Second charge mortgages are not necessarily the best option for every client wishing to capital raise. Typically, they prove useful for clients who are:

  • Tied into a fixed mortgage with restrictive early repayment charges.
  • Benefiting from an existing low mortgage rate
  • Being offered a further advance with a higher rate
  • Currently on an interest-only mortgage product
  • Wishing to capital raise for business purposes, inclu­ding deposits for buy-to-let mortgages.
  • Recently self-employed or contract workers

Like to know more?

If you would like to discuss your borrowing options please do make contact and one of our fully qualified independent advisers will be happy to assist.

Raising funds via your property in a cost-effective way

Perhaps you have got plans for the year ahead and want a cash injection to fund things, or maybe you need a new car or home appliance? Well, whatever your reasons for needing a loan, you can now snap one up for the cheapest ever rate.

There is a great choice of loans available these days but do be careful, a lot of the unsecured deals carry heavy interest rates. Secured lending (second charge) can be very cost effective indeed with record low interest rates currently on offer.

They are relatively easy to apply for and funds can be released much quicker than a traditional re-mortgage.

Lowest loan rate on record 2021

This is the lowest that secured loan rates have fallen, which will delight borrowers looking to consolidate their debts. It has come at a particularly difficult time of year for those who may be stressed over their finances and spending too much over Christmas – paying off an expensive overdraft or credit card should become a priority moving into the new year, so these low rates are likely to attract many consumers.

It is worth pointing out that these record-low rate second charge loans are unlikely to be around much longer as experts are predicting general rate rises all round. So if you are looking to raise funds it could be a good idea to act sooner rather than later.

Can we help?

If you are looking to raise funds and require help please do contact one of our independent advisers and they will be pleased to guide you.

Second charge loans gain momentum

Several lenders have claimed an increase 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 8.4% increase in people applying for second charge finance in the first quarter of 2021, when compared to the same time in 2020.

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

In addition, UK Finance has reported a 11% increase in re-mortgage applications in April 2021 compared to the same period last year. This is reinforced by the ONS reporting in their May House Price Index that the rate of increase in UK house prices is over 5%.

With an increase in re-mortgage applications, slump in the UK housing market and uncertainty around our economy due to covid-19 could suggest more people are choosing to improve their current properties – rather than take a potential financial risk of moving.

Growth in the market reinforces the fact there are plenty of opportunities in the current climate for second charges. It’s important to consider seconds as a solution for a refinancing or home improvement rather than just re-mortgage.

Key to this is to get professional assistance as borrowing money these days offers so many options and can be very confusing.

Help required?

If you are looking to take out a new loan please do make contact and one of our independent advisers will be happy to assist.

Second charge loans are seeing good times

The latest figures for the second-charge market, from the Finance & Leasing Association (FLA), make for positive reading. It found that the value of new business for April came to £88m, the most positive month for new lending in a year, while the number of new loan agreements is now unchanged from last March. It is an encouraging demonstration of how the market has picked up from the difficulties posed by the pandemic.

There is no escaping the fact that lenders in the second-charge market are raising their game and revamping, not only by product, but also by the way they lend.

Some are competing on price, unveiling new product ranges that are genuinely eye-catching on rate alone, while others are looking again at their lending criteria and identifying ways to open up their products to groups of borrowers who might ordinarily be excluded from the seconds’ sector.

What’s happening across the board, even from those lenders who aren’t adjusting their products, is a wholesale improvement in the level of service on offer.

Whether it’s greater use of technology or simply a revision in their lending processes, the industry as a whole is doing a fantastic job in looking at how it works with fresh eyes, and finding new, innovative ways of delivering a more efficient and satisfying experience for everyone involved in each case.

Compare the market today to the seconds market we saw just a few months ago, and the difference is extraordinary.

This is a market where the lenders are not just open for business, they have a particularly strong appetite to lend, and are launching products that opens up this sector to a wider range of prospective borrowers.

Second charge lending is growing

It is undoubtedly the case that the core uses for second-charge loans, such as for home renovations or consolidating debt, have not disappeared with the pandemic.

If anything, they have become even bigger drivers for borrowers.

One additional area where second-charge loans could prove particularly useful, but which may not be on the radar for mortgage advisers, is for clients classed as being in ‘persistent debt’.

What is persistent debt?

Last year, the FCA introduced a new definition for borrowers in what it termed as ‘persistent debt’.

This was classed as borrowers who have been charged more in interest and fees on their credit card and have paid just the minimum payment for the preceding 18 months.

There is no shortage of ‘persistent debt’ borrowers either. A study by the FCA last year suggested there are as many as three million credit card customers who are in persistent debt, who have paid an average of around £2.50 in interest for every £1 repaid.

Given the difficulties of the last year, let us be clear – the number of persistent debt borrowers is only likely to have increased.

So, what is that got to do with second-charge mortgages?

Well, credit card providers are required to write to borrowers in this position and put together a plan with them to start actually clearing that outstanding debt.

If they can’t, then spending on the card may be frozen.

Now, for some borrowers this won’t be a huge problem. They may have the disposable income to increase the amount they are paying each month, or even simply pay off their balance each month, and carry on as usual.

But let us be clear, the pandemic means there are far fewer borrowers in a position to just absorb those larger payments without it causing further issues.

As a result, these borrowers face having their cards frozen unless they can come up with the funds to get out of this persistent debt classification.

With a second-charge mortgage, homeowners can tap into the equity they have already built up in their property, releasing money to clear that outstanding credit card debt and maintain the card as a spending option, without having to touch their existing mortgage.

It’s a smart way to sidestep any potential early repayment charges or the risk of having to move to a higher interest rate on their first-charge mortgage.

Fantastic start to the year!

Second charge mortgage business volumes grew in the first two months of the year, according to figures published by the Finance & Leasing Association.

It said that £143m was lent in second charge mortgages in the first two months of this year, which was10% more than the same period last year.

In terms of sales volumes, there were 3,222 second charge loans lent to borrowers, 11.6% up on a year earlier.

What are second charge mortgages?

The mortgages are taken out by borrowers to run in addition to their existing mortgage and can be a useful way to raise funds without disturbing your current deal.

They usually have a shorter term than a mortgage and are similar to personal loans. However, unlike high street or unsecured loans, second charge mortgages are secured against your property. As the loan is secured against a property it is likely interest charged will be less than an unsecured loan.

Helpful for the self-employed.

If you are self-employed and have a current mortgage a second charge loan could be just the help you are looking for. Second charge loans are fast to complete and far more flexible than any re-mortgage.

A second charge loan offers a quick affordable solution to raising cash secured on your home.

Why choose a second charge loan?

  1. Faster to complete than a traditional re-mortgage.
  2. Normally less fees.
  3. Attractive interest rates.
  4. Loans are very flexible.
  5. Ability to retain current mortgage deal if on a low rate.
  6. Helps the self-employed

Like to 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.