It would be easy to be a little downbeat on the prospects for the second-charge market if you only looked at the lending figures from the Finance & Leasing Association (FLA).
According to the FLA, new second-charge lending in January came to a total of £56m, down by 46% on the same month in 2020, while the actual number of new loans was down by 40% over the same period.
But there are several other considerations, which fuels my optimism.
Firstly, it’s impossible to ignore the refreshing attitude of lenders at the moment. We have seen a succession of lenders make bold moves with their product lines, not least West One’s decision to increase its maximum LTV to 85%. This has been accompanied by lenders, like Spring Finance, returning to the market.
This has been incredibly encouraging. It clearly demonstrates the appetite to lend among these businesses, the desire to be active in the second-charge market and build a more significant presence.
And perhaps most encouragingly, it shows lenders are adapting their criteria to meet the needs of a broader number of clients. There is no shortage of would-be borrowers for whom a second-charge mortgage would be a good fit, but of course they can only make use of such products while lenders provide them.
A wider range of active lenders, with a broader range of lending criteria, is exactly what the market, and what our borrowers, need.
Another reason for being so positive about the prospects for our market is the underlying demand. The reality is that the number of borrowers who may want to make use of a second-charge is only going to grow in the months ahead.
For some, it will be the need for home improvements. We are approaching the end of what, we all hope, will be the final national lockdown. But one of the necessities of these lockdowns has been employees across the country having to spend more time working from home, and that is likely to remain in place for many, for at least part of the week. As a result, plenty of homeowners are looking afresh at their properties, and how they can be revamped in order to meet their needs for some dedicated office space. A second-charge may help them cover those refurbishment works.
Other borrowers may see a second-charge loan as the way to get their finances in better shape following the fallout of the pandemic.
There’s no escaping that the last year has unleashed shockwaves on the personal finances of millions, who could do with a little extra breathing space when it comes to their monthly lending repayments. Consolidating their debts in a single second-charge mortgage can provide those borrowers with that peace of mind, without having to touch their existing mortgage. And while high-street lenders express a highly cautious tone in assisting such customers, this further heightens the demand for second-charges.
Finally, it’s worth reflecting on the talent present in this market. We’re taking huge advantage of this currently, recruiting an almost unprecedented number of advisers, and I have never seen such an abundance of available high-calibre talent, all of whom are keen as mustard to become second-charge mortgage advisers.
Crucially these aren’t fresh-faced graduates – these are experienced, fully-qualified financial professionals who have spent years with high-street banks and the like, and it is a pleasure to see my organisation quickly filling up with such talent.
That experience is vital. It means they come to us fully understanding what quality customer service looks like and very quickly are being incorporated into our way of working. Furthermore, they completely understand the current concerns our regulator has about customer vulnerability and how to seamlessly incorporate ‘non-standard’ measures into their everyday tasks.
For brokers who are perhaps not hugely comfortable with handling second-charges themselves, and prefer to tap into the expertise of specialists like ourselves, this high standard of staff will be hugely reassuring that their clients will be treated properly.
Taken together, it is clear the second-charge market is on solid footing and will only grow from here. Brokers will want to think carefully about how they can be a part of that, and how second-charge loans can work for their clients.
