The tracker will provide data from the lender on borrower types, average mortgage size, loan-to-value (LTV) along with other information.
Evolution plans to release the tracker every quarter, reviewing its internal data and sector experience in order to regularly provide a snapshot of the second-charge market and its key themes.
Evolution Money offers two different types of second-charge mortgage product – one for those borrowers using the loans for debt consolidation purposes, and another for clients who have prime credit ratings.
The Tracker compares both these product areas, focusing on volume and value. Indeed, looking at its total lending data for the last six months – up to the end of February 2021 – the product split by volume of mortgages was 75% debt consolidation and 25% prime. By value the split was 63% debt consolidation and 37% prime.
In the previous six-month period product split by volume of mortgages was 81% debt consolidation and 19% prime and for value was 69% debt consolidation and 31% prime.
Purpose of loan
Borrowers using loans for consolidating debt took out an average loan of just over £20,500 according to the data. They had an average term of 131 months and LTV of 74.2.
The most common use for debt consolidation was to pay the loan provider (49%) and to pay the bank (37%). Repaying retail credit and car finance were the reasons for 8% and 5% respectively.
Borrowers also used their second-charge mortgage to pay county court judgements, debt collectors, first-charge mortgages and utility providers.
For prime borrowers, the average loan amount is £35,700 with an average term of 166 months and an average LTV of 77.4%.
Prime borrowers typically took out second-charge mortgages for debt consolidation (59%), home improvement and some consolidation (29%) and home improvement (9%). The average number of specific debts being consolidated by prime borrowers was six, and the average value of the debt was over £26,600.
Prime borrower increase
Steve Brilus, CEO of Evolution Money, said it had seen a notable uptick in both the volume and the value of second-charges being taken out by customers with prime credit ratings.
However, the reasons why customers require these second loans, he explained, remained unchanged.
He said: “This tends to focus on the debt consolidation opportunities it provides, although it’s also been clear through the pandemic period that borrowers also want to use their funding to make home improvements alongside paying off other debts.
“The increase in prime borrowers shows there is a distinct and growing customer demographic who may well have a mortgage need but are unwilling or unable to remortgage their first-charge product in order to secure their funds.
“As you might expect, the average loan amount for prime borrowers is higher and their uses for the money more varied, although we are still seeing most customers taking the opportunity to consolidate and pay off debts, with many also use the cash to improve their existing properties.
“This data – which will be updated every quarter from now on – does show second-charges may have a much broader appeal, especially to those prime borrowers who are not willing to extricate themselves from a first-charge mortgage especially if it means paying a substantial ERC in order to do so”
