Together sees peak in second charge lending amid industry-wide growth
Specialist lender Together saw its second paying loan increase by almost a quarter between September and October, reflecting a broader trend in the industry, with the second paying loan exceeding Â£ 1bn.
The lender said the increase was due to homeowners making improvements to their homes.
Commentators suggest that figures released in full tomorrow will show second charge loans hovering around Â£ 140million in November. This is the highest since 2009.
Second charge loans have also passed the Â£ 1 billion mark for 2021, which was touched on in its October report.
Scott Clay, Director of Distribution for Together, said: âMortgage rates have remained at historically low levels, so while many people want to free up money from their homes for home improvement projects, they don’t. would not necessarily want to remortgage because they could potentially lose that. advantageous rates plus, they may possibly have to pay hefty prepayment charges.
âIt wouldn’t make sense if they just needed Â£ 10,000 or Â£ 20,000 for home improvements and to consolidate unsecured debt at perhaps a much lower interest rate. Instead, it looks like a lot of people decide to take out a second secured charge against their home to get the job done and pay off the second charge payments on top of their monthly mortgage payments.
Matt Tristram (on the pictureLoans Warehouse chief executive added that 85 percent of second charge loans in November were for home renovations and debt consolidation.
In its October report, consolidation loans made up about 46 percent of loans offered, followed by consolidation and home improvements at about 30 percent and home improvements at about 19 percent.
Tristram added: âThe Covid pandemic and successive lockdowns appear to have given people the momentum to complete renovations on their properties, as well as to pay off unsecured debts. It used to be that second charge borrowing was considered expensive, but now we’re seeing record rates, so it’s an increasingly viable option. “
The interest rates for second loans tend to be higher than those for traditional mortgages because they present a greater risk to the lender. However, rates are currently at an all-time low with some offers available at less than 4% which means they are becoming more and more popular.