A second charge solution for the perfect storm

The cost-of-living crisis has not eased in the way many households expected. For a growing number of borrowers, it has become a slow drain on finances. Everyday costs remain high, savings have been used up, and short-term credit has filled the gap. Over time, that leaves clients paying a lot to service the credit each month but making little progress in reducing the overall balance.

January is often when this becomes clear. Credit card balances are reviewed, bank statements are checked, and borrowers realise how much unsecured debt has built up just to keep things steady. For brokers, this is already a familiar conversation.

This year, that pressure is building alongside another major issue. Around 1.8 million fixed rate mortgages are due to end in 2026. For many of those borrowers, a new deal is likely to mean higher monthly payments. The risk is not just the mortgage increase itself, but the fact it is landing on top of budgets already stretched by unsecured debt.

These two issues cannot be treated in isolation. For many clients, unsecured debt and mortgage affordability are already linked, and that link will only become more important as fixed rates end.

Most borrowers understand their mortgage payment. What often causes the problem is the number of smaller commitments sitting around it. Credit cards, personal loans, car finance and overdrafts can add up to a large monthly figure. When a fixed rate ends and the mortgage payment rises, even by a modest amount, the whole budget can tip from tight into unworkable.

In an ideal world, the client remortgages, clears the debt, and resets their finances. In practice, that is not always possible. Affordability remains a major barrier, particularly where stress rates and living costs limit how much lenders are prepared to offer. Credit issues also play a role. Some borrowers picked up missed payments over the last couple of years, and those marks can still restrict options even if their situation has improved.

Waiting until the fixed rate ends is often seen as the sensible route, but it does little for clients who are already struggling with unsecured debt today. If that debt is left unchecked, it can damage affordability further and reduce remortgage choices just when the client needs flexibility most.

The aim may not simply to tidy up finances, but to reduce monthly outgoings now and improve their position ahead of their next mortgage deal.

A second charge loan can be an option here. It allows a borrower to keep their main mortgage in place, avoid early repayment charges, and raise capital to clear higher-cost unsecured debt. In many cases, it can also complete quickly, which matters when a client is under pressure.

We see this regularly. Clients who cannot remortgage due to affordability or credit are able to stabilise their position through consolidation, bringing multiple payments into one and reducing the overall monthly cost. That breathing space can make a real difference, both day-to-day and when it comes to refinancing later.

The key is starting with a full view of the client’s budget and a clear understanding of what happens when the fixed rate ends. We regularly see clients who have difficulty in remortgaging due to an issue with affordability. Bringing multiple payments together by consolidation can reduce the overall monthly cost and make a real difference when it comes to refinancing later.

Second charges will not be right for every client, and they must always be considered carefully with full regulated advice and a clear view of total cost.