Data from broker John Charcol highlighted areas brokers should focus on as the second-largest loads market continues to grow strongly this year.
The latest results from the Finance and Leasing Association (FLA) showed a 10% year-to-date increase in the second-largest cargo market, although there was some lull in the summer.
However, the figures of John Charcol given exclusively to Mortgage solutions ” sister title Your money, reveal the main borrowing needs that second load loans meet.
It shows that second charge borrowers typically take out a loan of Â£ 106,168 based on a property value of over Â£ 900,000.
And there are three main reasons driving the market: debt consolidation, home improvements, and filing for a second property. (Click to expand the graph.)
When combined, they accounted for 90% of all second load loans arranged by John Charcoal from January 2016 to September 2017.
Specialized loan solutions gathered second-charge expert opinions on whether demand continues to grow or whether it may be constrained by general income squeeze and rising interest rates.
Here’s what they had to say:
Tim Wheeldon, COO at Fluent for Advisers (Photo)
I have always maintained that we need to manage expectations around the expansion of second mortgages. The Mortgage Credit Directive (MCD) certainly put secured loans on the radar of advisers, but was never going to be the starting point for massive immediate expansion.
Like the tale of the tortoise and the hare, slow and steady wins the race. We have experienced sustained growth in the sector this year. In August, the trend was still up and I expect this to continue. Second mortgages have a legitimate place in raising capital and our job is to educate advisors when and where secured loans are most appropriate.
Second mortgages, like the rest of the lending market, will respond to the laws of supply and demand, but I’m confident the growth curve will be rising as more advisors recognize where the secured loans can be the suitable choice for the clients.
Graeme Wade, Sales Manager at Spring Finance
The second mortgage market is in a strong position and offers incredible criteria for clients who are unable or unable to remortgage through conventional sources. The rates offered are as competitive as they have ever been, with more and more lenders looking to enter this market as they see the potential growth and importance of this industry and the clients it serves.
The potential rate hike has been under discussion for months and speculation has intensified in 2017 with November being the month currently forecast for a hike and it is clear that the big banks are preparing for that to happen with increasing their fixed rate agreements.
A high percentage of clients are brought into the second mortgage market through their mortgage advisors and it will continue to evolve and grow regardless of future base rate hikes as we have access to a extensive experience with lenders and introducers.
Richard Tugwell, Group Director of Intermediate Relations at Together
Looking at the FLA data for August, we have to recognize that volumes are up 25% from August 2016, so the fact that monthly lending was stable is probably more indicative of a seasonal slowdown as brokers make a shift. break for the summer.
The second loans have increased year by year and there is a clear demand for this type of financing.
Since interest rates are at an all time low, even if there is an increase, it is likely that we will always see a demand for second charges as an alternative to refinancing, for those who do not want to lose their contract. current or find it difficult to borrow more from their current lender.
There is flexibility with a second charge so they can choose a term that works for them, and maybe also avoid paying a prepayment charge on their first charge mortgage.
Since Brexit, there has been a market trend for clients to upgrade their current property rather than relocate, with home improvements being one of the main reasons clients are taking a second charge, and this should continue for the time being, which will continue to demand food.