The broker said while the sector had suffered during the lockdown and at the height of the pandemic figures showed it had experienced a strong bounce back in the summer which has helped it make a rapid recovery.
And this doubling of loans looks likely to be repeated once again in Q4, with firms such as Optimum Credit, United Trust Bank and Oplo (formerly 1st Stop Home Loans) leading the rapid increase in lending in the third quarter.
While Loans Warehouse admitted that its forecast of a doubling of growth in the last three months of the year was a ‘bold prediction’ it said there was great opportunity within the market.
In February of this year, just before the Covid-19 outbreak, second charge lending stood at a total of £107 million according to Loans Warehouse.
This figured plummeted by 81% by May to just £21 million but since the market recovery took place lending had more than doubled by August to £43 million.
Matt Tristram, co-founder of Loans Warehouse, said: “Despite the pandemic we have traded throughout the year and it is our opinion the opportunity in Second Charge lending has never been better than it is today.
“I’m confident that August’s results be at least doubled again before the end of year. Despite a rocky few months for the Second Charge sector positivity has once again returned.”
High LTV restrictions
Loans Warehouse said the industry was likely to be impacted by product restrictions at higher LTV levels and long delays in the mortgage market as a whole.
Indeed, Tristram predicts the increased demand will also see many borrowers turn to Second Charge products in the months ahead to raise funds for the home improvement boom and debt consolidation.
Biggest lenders
Loans Warehouse revealed how lenders such as United Trust Bank (UTB) and Oplo had taken a much bigger market share than pre-pandemic. At the start of the crisis UTB stood out for many, said Tristram, delivering a series of well-publicised summer ‘support packages’.
As such they could boast being the industry’s biggest lender in the market at one stage.
However, following a recent rebrand and its ability to maintain stable proposition throughout this year it is believed that Oplo grew to encompass over 20% of the second charge lending market in August, said Loans Warehouse.
Meanwhile, looking ahead the next few months, the broker forecast the return to the top of Optimum Credit.
The firm recently announced a £277 million securitisation which had allowed the lender to lift the majority of the restrictions that had been in place since March, reduce rates across its prime, near prime & XLTV range and it’s likely that September figures will show them back as market leader.
United Trust Bank has also continued with the release of several product enhancements last week including an increase in the maximum LTV back to 80%, a change also made a week earlier by Equifinance to their core plan.
Tristram added: “Competition between leading lenders will be the key driver which will see the Second Charge market double from the figures recorded in August before the end of the year.
“I expect to see September’s figures show a rise in lending to around £50 million with October and November breaking the £80 milion barrier with ease.”
