Home improvements were behind around one in three second charge loans taken out in the first eight months of this year, according to new data from specialist master broker V Loans.
This shows a move away from debt consolidation as the market opens up to new customers.
The master broker’s analysis of second charge loan purposes across its business between January and August found 33% were used for home improvements compared with just 17% in the same period in 2014. The reverse applied to debt consolidation – 75% of customers used second charge for debt consolidation in 2014 compared with 36% of customers in 2016.
The data showed increased use of second charge for property purchases and mortgages – 13% of customers used them for those purposes in 2016 compared with just 2% in 2014. And that was reflected in average loan sizes increasing 83% to £67,301 from £36,742 in 2014.
V Loans believes the data underlines how the market has changed following the implementation of the Mortgage Credit Directive (MCD) in March with customers and brokers increasingly realising how second charges can replace remortgages.
The implementation of the MCD has already delivered faster turnaround times and improved protection for customers which is in turn increasing demand as brokers identify new uses for loans.
Marie Grundy, managing director of V Loans, said: “The switch from debt consolidation to home improvement has been dramatic over the past two years and our own loan book demonstrates how the market is changing.
“It is particularly interesting to see the change in views among brokers about borrowers who can benefit from a second charge such as customers who do not want to lose fixed or tracker deals by remortgaging as well as interest only customers and people facing early redemption charges.
“The MCD has speeded up the process by removing cooling off periods and because a solicitor is not required for most second charge transactions this not only helps with the speed of transactions but reduces costs.”
