Second Charge lending

The second charge mortgage market has reported its highest monthly level of new business volumes for two years, returning to pre-pandemic levels, according to the latest data from the Finance & Leasing Association.

The number of new agreements rose by 59% to 2,660 and the value was 70% higher at £119m compared to February 2021.

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On an annual basis, second charge lending rose 72% by volume and 80% by value in the year to February compared to the previous 12 months.

Fiona Hoyle, director of mortgage finance and inclusion at the FLA, said: “In February, the second charge mortgage market reported its highest monthly level of new business volumes for two years and has now returned to pre-pandemic levels of new business by both value and volume.

“As consumers face higher prices and pressure on disposable incomes, any customer worried about meeting payments should speak to their lender as soon as possible to find a solution.”

By ROZI JONES

Source: Financial Reporter

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It’s been a very positive year for the second charge market with new business levels almost back to pre-Covid numbers.

Data from the Finance and Leasing Association (FLA) revealed that completions in October reached £109m which is the highest total for 2021 and the third consecutive month of growth. Agreements have increased annually by 26 per cent to 24,626 and the value of new business rose by 24 per cent to over £1bn.

To put it into context there were 28,016 second charge completions totalling almost £1.3bn in 2019 pre-pandemic. So, we could end 2021 on a similar level to 2019.

This new found momentum is expected to continue into 2022 and it is anticipated that we could see the highest second charge lending figures in the post financial crisis era.

Factors driving second charge growth

There are several contributory facts to the growth in second charge and 2022 will be heavily influenced by the high number of mortgage products expiring. These are worth billions of pounds with almost £40bn due to expire in January.

No doubt this will fuel record product transfer levels which will support further growth in the second charge market. Second charge can serve borrowers with additional borrowing needs who are likely to have proceeded with a product transfer on a like-for-like basis, particularly where this has been completed as an execution-only transaction.

On 16 December the Bank of England increased the base rate for the first time in three years from 0.1 per cent to 0.25 per cent in response to inflationary pressures. But even prior to this we had started to see an increase in mortgage rates in the first charge space as swap rates continue to rise.

Longer-term fixed rates, especially five-year fixes, are becoming increasingly popular for borrowers looking for payment stability against a backdrop of rising interest rates, which often carry substantial early repayment charges. A second mortgage offers flexibility where borrowers need to capital raise during the fixed-rate term.

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Change in circumstances

Many borrowers’ credit profiles may have been adversely affected by the pandemic. This means there will be a significant number of borrowers who could benefit by staying with their existing mortgage provider to ensure they can continue to access high street mortgage rates.

If they are benefiting from a low first charge mortgage rate, remortgaging away from their existing deal to raise capital may not be the best option for borrowers in this situation.

This is where a second charge would allow borrowers to raise further funds without disturbing their existing mortgage arrangements.

Housing stock shortages

The stamp duty holiday was introduced to keep the housing market active and it succeeded in its aim, some would say it over-succeeded.

Demand for house buying has resulted in prices rising annually by ten per cent in November, according to Nationwide. Since March 2020 when the first lockdown began house prices have increased by 15 per cent, which equates to a rise of more than £33,000.

The uplift in house prices coupled with a shortage of homes for sale has led to more homeowners opting to improve or extend their existing property. We have been seeing more of this particularly on larger and more expensive properties.

I expect this will continue in 2022 and second charges can provide flexibility both in terms of speed and loan size supporting home improvements in higher value property projects.

Reasons to be cheerful

Whilst the spectre of the new omicron variant may give cause for concern for a further lockdown, there are many reasons to be optimistic about the outlook for 2022 for the mortgage industry as a whole.

Borrowers will undoubtedly rely on professional mortgage advice more than ever. Lenders offer a wide range of financial solutions and this will ensure that as an industry we can strive to deliver the best possible outcomes for consumers with additional borrowing needs.

By Marie Grundy

Source: Mortgage Solutions

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The value of new second charge business came to £109m across 2,543 new agreements in October, which following September’s positive figures, has been cheered as a “return to more normal monthly levels.”

So says the Finance and Leasing Association (FLA) director of consumer finance Fiona Hoyle regarding the association’s latest figures, which describe the value of new business in October growing 55% on the year.

In the 12 months to October, the value of new business came to to £1.04bn, the report adds – a 24% annual increase.

And the total of new agreements in the 12 months to October now stands at 24,626 – an annual rise of 26%.

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Hoyle continues: “We expect new business volumes to continue to grow despite heightened economic uncertainty over the coming months.”

Paul McGerrigan agrees. He says: “Comparing the FLA figures out today with our own October and November performance, we calculate that the UK’s annual secured lending will comfortably exceed 2018’s total of almost £1.07bn – though this year’s final numbers may come in slightly behind the peak (post 2008 crash) of £1.3bn achieved in 2019.”

He adds: “Looking to the future – second charge lending typically reduces over December as families concentrate on Christmas, with a reawakening in January.

“Judging by this year’s growth in lending and house prices, we believe that – if the economy remains stable and unemployment under control – next year will experience growth beyond 2019’s figures.”

By Gary Adams

Source: Mortgage Strategy

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Second charge new business volumes rose by 293% in May 2021, according to the Finance & Leasing Association (FLA).

The number of new agreements in May was 1,910, and the value of new business was £84m.

In the three months to May 2021, the number of new agreements rose by 82% to 5,848, and the value of new business increased by 74% to £253m.

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However, year-on-on-year, the number of new agreements fell by 27% to 18,044, and the value of new business dropped by 33% to £784m.

Fiona Hoyle, director of consumer and mortgage finance and inclusion at the FLA, said: “The second charge mortgage market reported a second consecutive month of growth in May, and new business volumes increased by 12% in the first five months of 2021.

“The improvement in consumer confidence means the market expects to see the recovery in new business continue during the second half of 2021.”

By Jake Carter

Source: Mortgage Introducer

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