Second charge lending hits record high as sector returns to growth

Second charge lending hits record high as sector returns to growth
While March’s long-term high completion figure was partly attributed to seasonal factors, May’s almost-as-impressive performance gives us real optimism for the market in the months ahead.

Annualised second charge lending has surpassed the £900m mark for the first time, after three months of consecutive year-on-year new business volume growth in March, April and May, according to Enterprise Finance data.

At the end of Q1, the year-on-year picture remained lower than at the same point in 2016, with £871m lent in the year to March 2017 versus £898m in the previous year. However, an April monthly performance in 2017 of £79m was far better than the £51m seen in April 2016. This contributed to the annualised market returning to growth for the first time in more than a year, reaching £899m in April and topping the long-time high of March 2016.

May then saw an impressive £87m of new business posted, resulting in annualised lending breaching the £900m mark for the first time since the credit crunch (£917m).

The introduction of the Mortgage Credit Directive in March 2016 and the EU Referendum in the latter half of 2016 both curtailed the prospect of second charge market growth for 2016.


It is in this context that the March 2017 monthly figure of £93m new business lending was particularly significant. It represented a huge spike on the prior 10 months, all of which had posted relatively flat new business values, fluctuating between £69m and £77m, with the average monthly lending at £73m.

March's lending total was also over the March 2016 figure (£86m), even given the pre-MCD rush to complete deals under the previous Consumer Credit Act regulations.

Looking to April 2017, although activity decreased by 15% compared to March’s high, the new business volume for that month was £79m, significantly above the £71m average from April 2016 – February 2017, and up £28m from the previous April’s low of £51m.

By May, the growth trend of the sector seemed to have been confirmed, with new business volumes for that month standing at £87m – the second highest monthly totals pre-financial crash.
                                                                                                 
Harry Landy, Managing Director of Enterprise Finance, commented: “The second charge market has shown its resilience in recent months, and it’s promising to see that 2017 has got off to a really positive start. While March’s long-term high completion figure was partly attributed to seasonal factors, May’s almost-as-impressive performance gives us real optimism for the market in the months ahead.

“One year on since implementation of the MCD, we are seeing the quality of advice greatly improved and an overall customer journey that is now in line with the experience of taking out a first charge mortgage.

Moreover there’s a proliferation of products available on the market, meaning client needs are better able to be served. We have seen rates become more and more competitive, with lenders like Masthaven starting at 3.74%, and new entrants showing interest such as West One launching a secured lending proposition.

“What’s important now is that brokers are aware of the wide variety of property financing available so they can best advise their clients accordingly. They need to understand the role second charge mortgages can play for their clients, as understanding its benefits will help to unlock further growth for the market.”

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