The Finance & Leasing Association (FLA) has reported continued growth in the second charge mortgage market, adding £130 million worth of new business in June.
This marks a 29% increase on the same month in 2021, and new business volumes for the three months to June 2022 are up by 44% compared to the identical period last year.
The number of new agreements (2,854 in June 2022) also passed the pre-pandemic peak and was up by nearly a quarter (24%) compared to the previous year.
Andrew Fisher, chief commercial officer at Freedom Finance, said: “Debt consolidation is likely to be a core theme of the cost-of-living crisis, and second charge mortgages are one of many tools available to homeowners looking to pay off more expensive debt or simplify their credit commitments.
“Using second charge mortgages for this reason helps homeowners benefit from streamlining, and sometimes reducing, their overall debt repayments. It can also be an excellent way to take advantage of any property equity growth, especially if their area saw strong house price growth through the pandemic.
“A new second charge mortgage customer demographic emerging from the pandemic has been “improvers over movers” as people look to unlock the value in their home to fund renovations like loft extensions or home offices. Given that house prices keep rising and interest rates are also creeping up, we expect this trend to continue.
“Second charge mortgages could be particularly attractive to homeowners on long-term fixed rate deals who may be unwilling to re-mortgage and move onto today’s increasingly higher rates or understandably don’t want to pay a sizeable early repayment charge.
“Customers should always shop around from various providers to get the best second charge mortgage available for their circumstances. Using digital marketplaces will make this easier and can show customers only the deals they are eligible for while giving them access to regulated, impartial advice that considers their overall financial situation.”