The sad reality of the last year is that an awful lot of people have had to take on a host of different forms of credit to get by.
Steve Brilus (pictured) is chief executive officer of second-charge lender Evolution Money
Speak to anyone in the second-charge mortgage market at the moment, and you’ll quickly realise how busy everyone is. There’s no question that the sector is in a positive, active position at the moment.
That is borne out by the official industry statistics too. The latest data from the Finance & Leasing Association shows that in May there were 1,910 new second-charge agreements completed. That’s up by an extraordinary 293% on the same point in 2020. Even if you look over a longer timescale, the three months up to May, then again the number of new agreements is up sharply, by 82% on last year.
Obviously, 2020 was a difficult time for everyone, the second-charge market included. While we took steps at Evolution Money to remain active, to keep lending, there were other businesses who understandably felt the need to pause their lending for a period. The market today is rather different, however, with dozens of lenders competing for business.
Seconds are in demand
This is all the more welcome when you consider the attractiveness of a second-charge mortgage has rarely been so clear. There is no shortage of would-be borrowers who do not want to touch their original mortgage, and incur the early repayment charges and interest rate hikes that would likely follow, but who still need to raise funding.
For example, there are those who want to carry out work in their home. We’ve seen a jump in prime borrowers who have used second-charge finance to cover the costs of home improvements of late.
While the Stamp Duty holiday has encouraged many people to move home, others have elected to stay put and revamp their existing property to better suit their needs. This is particularly attractive to those who are going to be working from home for at least a portion of the week in future, but want a dedicated space within the property for this rather than having to work from the dining table or the living room couch.
And then there are those looking to consolidate outstanding debts. The sad reality of the last year is that an awful lot of people have had to take on a host of different forms of credit to get by. But now, as things hopefully continue to pick up, they are in a stronger position and want to consolidate those debts into a single, manageable monthly payment.
These are borrowers that mortgage advisers are no doubt speaking with on a regular basis, and who are perfect candidates for a second-charge mortgage.
The need for speed
Another selling point of a second-charge mortgage, and one that’s all too often overlooked, is just how quickly it can be arranged. At Evolution Money, it’s something we pride ourselves on, having reviewed the way we work to identify ways that the process can be sped up. That includes measures like sidestepping the need to use solicitors for cases in England, and utilising desktop valuations so borrowers aren’t stuck at the back of the queue for already busy valuers.
It’s still crucial that the second-charge mortgage is handled in a responsible and compliant manner, so the borrower is absolutely clear on the sort of credit they are taking out. But there’s no question that this focus on speed has enabled us to help a host of borrowers who were facing imminent deadlines, which would have led to punishing fees.
To be able to help those borrowers avoid that financial pain and provide them with funding that puts them on a more secure footing, is incredibly satisfying for everyone involved.
The second-charge market is on the up, with significant numbers of borrowers who would benefit from this finance and a host of lenders keen to provide that funding. That’s why it’s crucial for advisers to take the time to understand what makes each lender different, and which are best placed to help - even when borrowers face a tight deadline. A case that is beyond one lender may be absolutely doable with a different lender, particularly those of us who have streamlined our processes so that we can deliver funding fast.