Second charge lending sees strong start to 2024 with 10% growth: FLA

Second charge mortgage new business volumes grew by 17% in February compared to the same month in 2023, with the value of new business rising by 22% to £130m, according to the latest figures from the Finance & Leasing Association (FLA).

In the first two months of 2024 second charge lending grew by 10% compared to the same period in 2023.

However, lending remains 8% lower in the 12 months to February compared to the previous year.

The figures also show that total asset finance new business (primarily leasing and hire purchase) grew in February 2024 by 10% compared with the same month in 2023. In the first two months of 2024, new business was 9% higher than in the same period in 2023. 

Fiona Hoyle, director of consumer & mortgage finance and inclusion at the FLA, said: “The second charge mortgage market has made a positive start to 2024 as new business volumes increased by 10% in the first two months of this year compared with the same period in 2023. In the twelve months to February 2024, new business volumes were 8% lower than in the same period in 2023.

“The distribution by purpose of loan in February 2024 showed that 60% of new agreements were for the consolidation of existing loans, 13% for home improvements, and a further 23% for both loan consolidation and home improvements."

Geraldine Kilkelly, director of research and chief economist at the FLA, added: “Growth in the asset finance market since April of last year has been predominately supported by higher levels of new business in the new car finance and commercial vehicle finance sectors. By contrast, the machinery and business equipment finance sectors have reported weaker demand.  New finance provided for construction equipment, for instance, fell by 16% in the twelve months to February 2024.

“Lending to SMEs by FLA asset finance providers grew by 4% in February and reached £23.6 billion in the twelve months to February 2024. The latest SME Finance Monitor suggests that asset finance is currently used by a third of SMEs with 10-49 employees and by almost a quarter of SMEs with 50-249 employees.

“The asset finance market is expected to continue to grow in the near term supported by further growth in the vehicle finance sectors. More broadly, investment intentions remain subdued as a result of continued uncertainty about demand and pressure on net margins.”