"Second charge mortgages are used as a tool by customers who recognise that the financial and flexibility benefits align with their objectives and circumstances."
However, the reality is that every time you are talking to your customers about raising capital on their property, you should be considering a second charge as an option alongside a further advance or remortgage.
One argument broker sometimes gives for not discussing second charge mortgages is that it’s not appropriate for their customer base. This is predicated on a myth that second charge mortgage is a product of last resort, only valuable to those in a difficult financial position who have no other options. The reality, however, is the exact opposite. Second charge mortgages are used as a tool by customers who recognise that the financial and flexibility benefits align with their objectives and circumstances. In short, it’s the best option for their needs.
To demonstrate this, here’s a bit of information about the typical profile of a second charge mortgage customer, who, according to our information, is 42, has two children and borrows an average of £42k. The average income of a second charge mortgage customer, based on our data, is also £72,545, which puts them very much in the category of top earners. In line with this, the average house price on which a second charge mortgage is secured is £428,000 and the average number of bedrooms is four. This is considerably more than the average UK house price, which is just under £270,000 according to government statistics, and the average LTV of lending is just 65%.
Customers do not only access second charge because of adverse credit, although it can provide a good option for customers who have experienced credit issues in the past or are looking to consolidate debts. According to our data, nearly three quarters of second charge customers are considered as prime. In line with this, arrears are at the same level as the first charge market.
A second charge mortgage could be a first choice product for some customers who want to raise capital on their home, but you won’t be able to tell immediately. In order to guarantee your customers the best service, you’ll need to understand all of their circumstances and, of course, review all of the capital raising options.
