The Finance & Leasing Association’s data on the second charge mortgage market has revealed continued growth in April with the value of new business reaching £127 million, marking a 54% increase from April 2021.
The number of new agreements was 2,802 of which 53% were for the consolidation of existing loans, 16% for home improvements, and a further 25% were for both loan consolidation and home improvement.
Compared to the respective period from the previous year, the three-month period to April 2022 saw growth of 58% and the 12-month period to April 2022 saw an 83% increase.
Andrew Fisher, chief commercial officer at Freedom Finance, said: “The second charge mortgage market continues to show continued growth and we expect this to accelerate through the year as people look to capitalise on property equity following the boom in house prices through the pandemic.
“This has enabled more homeowners to look towards second charge mortgages as a means of using the value of their property for other means. For example, they now may be able to use second-charge mortgage borrowing to finance home improvements like installing a home-office, improving the insulation of the property or installing greener energy sources like solar panels.
“As the cost of borrowing rises and household budgets are squeezed, debt consolidation is likely to be another major theme of the current inflation shock, and second charge mortgages can be a timely and favourable method of clearing or reducing existing debts.
“Given the recent increase in interest rates and potential further hikes from the Bank of England, those on longer-term fixes may be reluctant to re-mortgage given they would likely move on to a more expensive rate and may also face a hefty Early Repayment Charge – second charge mortgages serve those customers’ needs very effectively.
“As ever, it is crucial that customers compare products from different lenders to ensure they are getting the best deal they are eligible for and that is the most appropriate deal for their personal circumstances.”