Ultimately, the vast majority of second-charge borrowers fall into one of two categories: those looking to carry out home improvements, and those looking to consolidate existing debts.
Barney Drake is chief executive of Specialist Mortgage Group
The second-charge market really has had a positive first half of 2021. The latest figures from the Finance & Leasing Association (FLA) show that in the three months to May, the number of new agreements was up by 82% on the same period of last year, while the value of those agreements jumped by a considerable 74%.
There are all sorts of different reasons for the growing appeal of second-charge mortgages. In some cases, it’s simply down to education; advisers are gradually becoming more comfortable with how seconds work, and the sorts of clients they could be perfect for, and so are finding themselves more confident in directing them towards specialists who can help those clients with the finance they need.
There’s also the simple matter of necessity. Ultimately, the vast majority of second-charge borrowers fall into one of two categories: those looking to carry out home improvements, and those looking to consolidate existing debts.
And there is no shortage of borrowers in that position currently. We have seen plenty of clients who want to revamp their home in order to better meet their needs, particularly if they are set to work from home for the foreseeable future, at least for a couple of days a week.
Similarly, the tumult of the last year and a half has meant there are plenty of borrowers who have taken on a range of different forms of credit, and would relish the opportunity to consolidate those debts into a single, simple payment.
However, an often overlooked factor in the positive performance of the seconds market has been the behaviour of the sector’s lenders, particularly when it comes to delivering an innovative approach to product design and service.
Doing things differently
A perfect example is Selina Finance, a relatively new entrant to the market, which has combined incredibly low pricing with an ingenious drawdown product design.
This is perfect for home improvement clients, who may know how much they need to borrow overall but will only need to release those funds in stages.
Those clients benefit not only from the low interest rates, but from the fact interest only accrues when each stage of the drawdown takes place.
Another lender worth mentioning here is West One. All lenders could take note of the way that they have engaged with advisers, sitting down with us to get a better idea of what they could do better and how certain frustrations and issues could be removed.
It’s been a remarkable turnaround; because of the way that West One have revamped their operations based on the dialogue with businesses like SMG, they are now a joy to deal with.
Speed can often be a huge issue for second-charge borrowers. They need to clinch that finance swiftly, and while as an industry second-charge lenders are generally impressive at that turnaround, there have been times where we’ve had clients who we feared could not be helped before they faced a punishing financial deadline.
This is an area where Evolution Money has really stepped up; we’ve had a host of clients complete with Evolution in the last month, who likely would not have been able to get over the line with another lender.
It’s another unique offering, where Evolution takes the client and handles the entire advice process, leaving advisers to relax knowing that the client is being well looked after. What’s more, the whole process is incredibly fast, meaning even those clients who face a sharp deadline can get hold of the funding they need.
Setting the standard
Those lenders represent just a few examples but demonstrate the way lenders have taken the time to better understand precisely what advisers and clients need, and revamped the way they work and lend in order to provide a higher standard of product and service.
The result has been clients enjoying more competitively-priced funding - which is always going to be welcome - while the process itself is far smoother and straightforward for all involved.
If lenders continue to embrace this creative approach, by taking constructive feedback on board and utilising it in their product and service propositions, then second-charge mortgages will become a viable option for a far greater number of borrowers.