Second charge mortgages have been named as the fastest-growing segment in the post-pandemic UK property finance market, research by Pepper Money reveals.
Analysis of official data from the Bank of England and the Finance & Leasing Association (FLA) shows that the second charge market has expanded by nearly a third (31%) since the start of 2020, marking the highest growth rate in the market.
In the second half of 2024, growth in this segment surpassed the previous year’s performance by 25%.
The next fastest-growing market segment was first-time home buyers, which saw an annual 21% increase.
Second charge mortgages allow customers to access the equity locked up in their homes without impacting their existing mortgage rates.
Overall, homeowners accessed £1.7bn in equity via second charge mortgages in 2024, an increase from the £1.4bn in 2023.
A total £6.5bn of housing wealth has been accessed by property owners in this way since the start of the pandemic, a 27% increase compared to the preceding five years.
Out of this total, Pepper Money wrote over £500m in loans in 2024, which marked a record year for the specialist lender.
Pepper Money’s own data shows customers are using secured loans primarily for debt consolidation, home renovations and occasionally to pay tax bills such as the new VAT on private school fees.
Second charge mortgages experienced nearly ten times more lending activity than the buy-to-let (BTL) market and a 33% higher growth rate than all homebuyer lending.
Additionally, second charge loans saw four times more growth than the remortgaging market, which faced an 8% decline in value in 2024 due to an unfavourable interest rate landscape.
Pepper Money director of second charge mortgages Ryan McGrath says: “It remains a challenging lending environment with the cost-of-living crisis continuing to act as a barrier to improving people’s financial positions and higher interest rates causing buyers to deeply consider their options out of fear of disturbing their existing, favourable, fixed-term deals.”
“But the reality is people can’t put their lives on hold until interest rates fall which has paved the way for secured loans to rise significantly in popularity, enabling homeowners to tap into the equity they’ve built up in their homes and use this to meet their current financial needs without disturbing their main mortgage.”
“Recent FLA data shows that the second charge mortgage market grew by 29% in January compared to the previous year, and it’s expected that around 40,000 households will turn to homeowner loans in 2025.”
“The market grew faster than the homebuyer lending market as a whole and remortgaging market too, to reach £1.7bn in 2024 and positioning itself well for more to come in 2025 to meet the clear demand from homeowners.”
