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UK housing market sees growth of second charge lending

Secured lending specialist V Loans believes that a combination of record low rates in the second charge market and the sector’s strong growth since 2011 highlights the benefits for customers and the opportunities for brokers.

Customers who would potentially benefit include interest only borrowers, people facing early repayment charges, and people benefiting from lifetime trackers or low fixed rate mortgages who would lose deals by remortgaging, as well as those who may want more flexible terms for their further borrowing.

Landlords could also be in line to benefit from increased competition in the buy to let second charge market, leading to significant pricing reductions, making second charge lending an attractive alternative to remortgaging allowing landlords to benefit from the increased equity within their current portfolio.

The second charge market, which is on course to lend up to £750 million this year, has achieved year on year growth since 2011 against a background of a subdued remortgage market.

Rates have dropped to all-time lows of 4.05% above base rate making the case for borrowers to take out a second charge without disturbing their existing mortgage arrangements.

However V Loans estimates just 50% of advisers offer second charges to their clients, and is urging advisers to consider the benefits of second charge loans.

'Remortgaging or taking a further advance is not always in the client’s best interest and therefore it’s essential that all options are considered,' said Marie Grundy, managing director of V Loans.

'Interest only customers, those benefiting from lifetime trackers and low fixed rate deals or those who do not want to incur substantial early repayment charges by remortgaging, including landlords who wish to release trapped equity, could all stand to benefit from second charge finance,' she explained.

'The pending alignment of regulation for first and second charge markets will deliver huge opportunities and innovation to the market allowing advisers to provide better customer outcomes. Intermediaries should seriously consider including second charges within their scope of service ahead of the regulatory changes next year,' she added.

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