It’s no secret how hard it currently is to secure the services of a tradesperson or how expensive both the parts and the labour seem to be. Everywhere you look someone seems to have had, be having or at the very least planning to have some kind of work done to their home or garden. The number of garages I’ve seen that are so far removed from a place where a car resides is frankly amazing.
As the costs associated with such work appear to have risen consistently, the sheer ambition of projects soared and some historically low rates consistently on offer from a variety of lenders, then it’s little wonder that the number of people taking out second charge mortgages to fund home improvements has surged over the past year.
This was evident in a recent survey by Shawbrook Bank which revealed that 81% of second charge brokers have seen an increase in demand for financing to fund home refurbishment projects. Brokers reported that half of their clients were borrowing in order to fund a redecoration project including fitting a new kitchen or bathroom, while the other half used finance to fund an extension or loft conversion.
Confidence is also rising within the intermediary market, with 87% of second charge brokers reporting heightened confidence in the lending environment for the remainder of this year. This marks a sharp rise when compared to the 30% who were suggested to have such confidence levels at the end of 2020. In a sign of further optimism, 75% said they were confident in the opportunity for business growth when thinking ahead to the remainder of this year. This also demonstrates a significant hike from a significantly lower figure of 19% back in December 2020.
When commenting on this survey, Shawbrook’s head of sales Gavin Seaholme pointed out that: “A number of landlords and property investors continue to rely on personal loans or credit cards to finance their DIY projects, which can be a riskier and more expensive approach to take. Understanding your client’s aims for the project as well as their current financial position will all help to inform the pathway they choose.”
I think he makes a really salient point here. All advisers, and many clients for that matter, are now fully aware of what a second charge is. However, gaining a full understanding of where such a loan can be of real benefit remains key to maximising the wealth of opportunities currently on offer.
Home improvement is arguably the simplest use of a second charge loan but there are many other ways it can be successfully utilised and being able to confidently identify and present a solution to meet an array of borrowing scenarios is no easy task. Second charge lenders are constantly innovating and coming up with new ideas/products/citeria to meet ever-changing borrowing needs. Meaning advisers who may only occasionally come across a case which they think may benefit from a second charge option can often find it difficult to source an appropriate solution. Or turn away a client because they didn’t realise that a viable and responsible product exists.
Identifying specialist lending scenarios is only half the battle. No one is expecting you to advise and arrange them all yourself. Simply establish your model – in terms of what type of business you want to focus on – and partner up with a trusted packaging partner for the rest. That way you can be safe in the knowledge that you retain the ability to meet all your clients specialist needs, not just the most straightforward ones.
Daniel Yeo is founder and managing director at Specialist Finance Centre