The latest Second Charge Report from Enterprise Finance has revealed that the second charge market is showing sustained growth following seven consecutive months of increased annualised lending.
It found that despite a period of ongoing political and economic uncertainty, an increasing number of consumers and investors are turning to second charge mortgages, driving the market close to £1bn a year.
When comparing the market year-on-year, £979m has been lent in the 12 months to September 2017, compared with £892m the year before. This represents seven months of consecutive year-on-year growth from March to September. Alongside this, second charge mortgage new business has consistently increased by both value and volume. Annualised numbers of cases advanced 9% from just over 19,000 in March 2017 to almost 21,000 by September, while the equivalent average loan size increased 3% to almost £47,000. More borrowers are taking out second charge mortgages, and of a higher value.
In July alone, lending in the month reached £90m. Although this is less than the £94m lent in June, new business was up 23% by value and 21% by volume compared to the same month last year. Similarly in traditionally-quiet August, at the heart of summer holidays, loans increased 25% by value and 11% by volume, with £91m lent in the month.
Following strong performances in monthly lending stretching back to February, September was a notably quieter month by the standards of 2017, at £77m and equal to September 2016. The report said that, as a single month, it is too early to suggest a reversal of the strongly positive trend seen throughout 2017.
Harry Landy (pictured), managing director of Enterprise Finance, said: “The second charge market has gone from strength to strength, shown by eight consecutive months of growth. The sector has shown resilience amid ongoing political and economic uncertainty, at a time when confidence in the property sector as a whole seems to be gradually declining.
“While we may see a few bumps in the road as Brexit negotiations stumble along, the strength shown gives us real optimism that this upward trend will continue. An increasing number of consumers are taking out second charge mortgages, and of higher value, whether it’s to fund renovations, help a family member with a deposit, or consolidate household debts.
“Moreover, we’re finally seeing brokers being more confident with the range of second charge products out there, and advise their clients accordingly. What’s important now is that brokers continue to grow this confidence, as fully understanding the role second charge mortgages can play for their clients, and the benefits they can have, will help to unlock further growth for the market.”