That being the case, there are a number of positives for the second-charge mortgage market at present, the advisers active in the sector, the master brokers and packagers who are so pivotal, and of course the lenders offering the products.
Recent figures from the Finance & Leasing Association (FLA) reveal the second-charge market had a very positive July this year, with lending up 153% to £101m year-on-year, with the number of loans agreed also 149% up on the same time last year.
Now, it might be possible that some try to discount this time last year as a relevant benchmark because we were only a couple of months out of the first lockdown and the market was still finding its feet, but there’s no arguing that these figures are a big improvement and perhaps show signs of a new normal for the second-charge market.
For a wider review, we might wish to look at the last three months compared to the same period last year, and perhaps unsurprisingly this also shows a sharp improvement – lending was up 217% - although over the last 12 months lending was still 11% lower when compared to the previous 12-month period.
In other words, it’s still something of a mixed picture albeit one that appears to be heading in the right direction, and one that could be said to be surfing a wave of unprecedented interest in seconds, aided and abetted by a second-charge sector which is perhaps getting the message out better than it has done ever before.
That hasn’t always been the case but I’m sure the sector as a whole is much more engaging and efficient in terms of the way it informs and educates advisers on where a second charge might be the right option. Of course, we’ve tended to focus on debt consolidation – particularly amongst those who might not have the cleanest credit record – but increasingly there are far more clients for whom a second-charge might be suitable, and they are increasingly likely to be ‘prime borrowers’ as well. That message appears to be hitting home.
Our own regular Tracker survey continues to show this trend. For example, over the three months to the end of August, the number of prime borrowers by volume of business increased by 6% compared to the previous three-month quarter and was up 7% on the quarter before that.
This could be down to any number of reasons, including the fact that prime borrowers are still utilising their second charge to pay off debt, however, there is also a greater number of clients suitable for a second charge because they want to make home improvements.
Indeed, the second-charge loan value for prime borrowers rose again in our latest iteration of the Tracker, up to £33,794, compared to just £21,151, while the average LTV actually dropped for prime borrowers, now down to 69%. Those bigger loans are being utilised in different ways, and we’ve seen many homeowners accessing a second charge in order to renovate their existing homes rather than seeking to move and incurring all the costs and stress that comes with a new purchase.
There are also options for borrowers who might ordinarily remortgage or access a further advance to fund such work but don’t wish to pay an ERC or may have seen their circumstances change recently which means they don’t meet the criteria of the first-charge lender.
All this and more, plus the wide variety of products available in the second-charge space, the option to use a master broker/packager if you don’t feel comfortable recommending seconds, and a highly competitive market, means that advisers are increasingly looking at the sector as a real opportunity to service clients and grow business levels.
Long may that continue and the more advisers who engage, the more customers will be serviced to provide funding for a growing range of needs.