Second charge lending surges as homeowners plan improvements in 2022

The latest industry-wide figures compiled by specialist broker Loans Warehouse show that second-charge lending totalled £137 million in November – the highest since 2009 – and has now surpassed the £1bn lending mark for 2021.

Scott Clay, distribution director for Together, said its own figures mirrored this trend, with an increase of nearly a quarter (24.6%) on its second charge lending between September and October.

He said: “Mortgage rates have remained at historic lows so, while many people want to release cash from their home for improvement projects, they wouldn’t necessarily want to remortgage, as they’d potentially lose that favourable rate plus, they may possibly have to pay hefty early repayment charges. This wouldn’t make sense if they just need say £10,000 or £20,000 for home improvements and to consolidate unsecured debt at what may be a lot lower rate of interest.

“Instead, it looks like many people are deciding to take out a second charge secured against their home to do the work and pay back the second charge payments alongside their monthly mortgage payments.”

Matt Tristram, managing director at Loans Warehouse, added that 85% of the second charge loans taken out in November this year were for home improvements and debt consolidation.

He explained: “The Covid pandemic and successive lockdowns seems to have given people the impetus to carry out home improvements on their properties, as well as paying off unsecured debt. Previously, second charge borrowing was seen as expensive but we’re now seeing record low rates so it’s an increasingly viable option.”