The latest Enterprise Finance Secured Loan Index has revealed that May saw a fall in monthly second charge lending of 1%.
Secured lending fell back by 1% to £73m in May, the report said.
The slight cooling in activity means there was 2% less second charge mortgage business in May than during March’s recent peak,
However, on an annual basis, lending is up 12%.
Secured lending over the past year has now passed the £800m barrier, with £818m of completions conducted in the 12 months to May 2015, an 18% uptick on the previous equivalent period.
Harry Landy (pictured), director of Enterprise Finance, said: “The spike in secured loan activity in March was always going to be a hard act to follow and subsequently we saw a slight calming in April and May as pre-election uncertainty took hold. With the benefit of hindsight and knowing how conclusive the eventual result was, it can be difficult to remember how unsure people were back in spring.
“Despite the dip, we are still comfortably above the levels experienced a year ago and significantly higher than the longer-term average. Sustained growth in any industry is often interspersed with slight corrections or plateaus and the slight dip in May is unlikely to point to a wider malaise.
“The annual lending figures prove that secured lending is a sector heading in the right direction, with the £818m lent in the last year easily eclipsing the £694m issued in the 12 months to May 2014. Indeed, this yearly total has almost doubled over the past three years showing that demand for consumer credit has continued to increase as the country has extracted itself from economic turmoil – well and truly spending its way out of recession.”
Average loan-to-value ratios currently stand at 61% having dipped to 56% in March, a return to the norms witnessed at the start of the year. The typical first charge that secured loans sit behind continues to rise, with the average original mortgage size sitting at £254,634.
The proportion of transactions that home improvements account for has reduced slightly to 47%, but they remain the most popular motivator for homeowners utilising secured loans. An increasing number of individuals are taking out secured loans for a blend of reasons, with almost a third accessing capital for renovations as well as consolidating existing debts, Enterprise said. Business purchases and buy-to-let deposits are among some of the other reasons cited.
Landy added: “There is still demand for the occasional six-figure loan, but the majority of applicants are after smaller injections of finance. During the extremely busy spring period we saw average loan sizes rise above £67,000, but this has now stabilisedto a level more in keeping with what we’ve seen over the past year.
“With house prices continuing to rise, many homeowners are deciding to take advantage of this increased equity to beautify their existing properties rather than to move to another property altogether.”