Let’s make second charge lending as normal as walking into a high street bank

With mortgage interest rates quickly rising and house sales slowing, landlords and homeowners are increasingly finding themselves in a position where they want to access cash while wishing to hold onto their fixed rate mortgage or buy-to-let deal.

Second charge loans are the perfect solution.

We’ve seen a surge of people needing cash for a multitude of business uses from paying off business debts and refurbishing properties to expanding portfolios and paying tax bills.

And second charges have freed up equity while helping clients hold onto their existing, first charge, loans.

Furthermore, they’re easier to access than secured loans and can be quick to complete – we’ve just completed a second charge loan in 20 working days.

So why aren’t more brokers and intermediaries using them?

Second charge is a niche market and there’s still much education to be done around this type of loan. But they’re ideal for people wishing to raise funds for all business purposes and borrowers should know about this lending option.

The typical monthly interest payments on buy-to-let mortgages have soared by an average 75.7% in the past year, and landlords making a full mortgage repayment each month have seen an increase of 31.6%.

As interest rates increase and loan costs get higher, it is likely to make 2023 a year of homeowners and landlords staying put and utilising their existing equity for business uses.

What’s more, in 2022, borrowers took out almost £2bn in second charge loans and brokers should assume that if homeowners stay put and carry out renovations during this time of instability, this figure is likely to significantly increase.

This means for brokers, there is lots of business to be won through second charge lending. Knowledge of it is paramount if they are to reap the rewards. Brokers should have second charge loans as part of their arsenal, as they can make a great point of difference. Borrowers should be asking for them.

We need to double down on educating borrowers on the benefits (and risks) of second charge loans so borrowers can make a considered decision that could release equity and maintain their mortgage status.

A recent trend report says that, in our industry, the average portion of second charge lending stands at 13.7% of the business. But at Somo, it counts for around 50% of lending as it has been designed for almost any borrower profile, circumstance and scenario. This is why we feel we have the knowledge and expertise to put our heads above the parapet and advocate for it.

It's our hope that in five years’ time, we’ll live in a world where second charge lending is standard and is as common as going to a high street bank to raise funds.

Til then, we’ll continue in our quest to raise awareness of the solutions that second charge loans bring.