The £66m of secured lending witnessed in January represented a 2% monthly increase from December’s £65m and an 11% increase from January 2014, according to Enterprise Finance’s first Secured Loan index.
The actual amount lent on an annual basis has increased from £609m for the 12 months to January 2014 to £779m for the year to January 2015 – a rise of almost 28%.
“Lending of £66m in January shows that the secured loan market got off to a steady start in 2015 with a 2% month-on-month improvement,” said Harry Landy, director of Enterprise Finance.
“This is slightly more modest than the uptick we usually witness at the start of the year, but the usual seasonal slowdown in activity from November to December didn’t materialise at the end of 2014 which made a more significant jump unlikely.
“Nevertheless, the year-to-date lending figure of £779m proves this is definitely still a market heading in the right direction as more homeowners wake up to the usefulness and versatility of second charge mortgages. It also tallies with wider trends which show growing consumer demand for credit as sentiment improves and individuals reconsider ventures that might have been put on hold during the previous economic uncertainty. A new year is a perfect time to be launching a new index and we hope to offer comprehensive detail and insight into what is happening in this fast-growing sector and why.”
The secured loan distributor’s research shows that the current average secured loan size in January was £54,050, an increase of 15% from December and 12% above last January’s figure.
The typical loan-to-value amount is 61% at present and the average first charge that secured loans are currently sitting behind is £234,313.
Home improvements are currently the major motivator for individuals taking out secured loans; accounting for 47% of all activity. Debt consolidation is the second most popular reason for using a second charge mortgage, with access to capital and purchases cited as other common factors.
The secured loans market was 30% bigger in December 2014 than it was in December 2013 and this annual improvement was even more marked in the first half of the year, peaking with February’s 66% year-on-year uptick.
Landy said: “The actual size of the remortgaging market continues to dwarf that of second charge lending, but the annual change figures make for interesting reading. While homeowners seemed to shy away from remortgaging in the second half of 2014, the secured loan market continued to grow in stature. While this correlation may be entirely coincidental, there are definitely individuals who are viewing secured lending as a viable alternative to remortgaging and something that won’t endanger their mortgage rate which – given current interest rates – is likely to be extremely competitive.
“Secured loans – indeed loans in general – may once have been the sole preserve of the hard up or those in a tight spot financially, but they are now increasingly used by comfortably-off homeowners who want a cash injection to further improve their quality of life. The value of the market is unlikely to overtake that of the remortgaging market any time soon, but as more homeowners realise it is a feasible option, it will continue to make inroads.”