Second charge mortgages are setting the pace for growth in the UK mortgage market, according to the latest research by Pepper Money.

The specialist lender’s analysis of official data from the Bank of England and Finance & Leasing Association (FLA) reveals that second charge mortgage lending to UK consumers grew 17% year-on-year in first half of 2024.

As a result, second charge mortgages recorded the fastest growth rate of any market segment, beating the 13% growth in first-time buyer lending and 5% growth in further advances.

All other market segments saw a year-on-year decline in lending activity in the six months to June 2024.

With homeowners accessing £804m of equity between January and June, second charge mortgages were responsible for more than ten times the lending activity seen in the buy-to-let market – coming in at £804m vs. £76m.

Alongside typical uses such as debt consolidation and home improvements, Pepper Money’s data shows customers using homeowner loans for, paying tax bills and some customers are also using their homeowner equity to fund deposits for BTL homes.

Pepper Money’s analysis shows the same growth trend has played out over both a two-year and five-year period.

Comparing back to first half 2019, the year before the Covid-19 pandemic struck, according to Pepper Money analysis, lending via second charge mortgages has grown at twice the rate (28%) of any other segment over the intervening years.

First-time buyer lending again is the nearest challenger but trails behind in second with a 13% post pandemic growth rate.

Second charge mortgages also stand out as the only segment of the mortgage market which performed stronger in first half 2024 than it did during first half 2022, before the infamous ‘mini-Budget’ during the Liz Truss administration shook up the UK economy and triggered a steep rise in interest rates.

Since the pandemic subsided, homeowners have accessed £3.2bn via second charge mortgages over the last 10 quarters, up until Q2 2024. This is 27% higher than the £2.9bn of lending during the equivalent period before the pandemic.

Commenting on the data Pepper Money director of second charge mortgages Ryan McGrath said: “Make no mistake, taking out a homeowner loan is still a niche pursuit, but we’re starting to see this change as customers realise the financial firepower they have stored away in bricks and mortars.

He added: “Without doubt, there are too many people who only think of personal loans or credit cards who might benefit from carefully considering whether a homeowner loan could be a better fit for their needs.”

“Bricks and mortar are an untapped resource when it comes to helping UK households pursue their financial ambitions. Second charge mortgages are steadily coming into their own in the post-pandemic landscape and we fully expect this trend to continue.”