Market data shows first monthly contraction since April 2025, though longer-term growth trends remain strong
The second charge mortgage market recorded a modest annual decline in new business volumes in May, according to the latest figures published by the Finance & Leasing Association (FLA).
The drop marks the first monthly contraction in the number of new agreements in over a year. A total of 3,245 new agreements were completed in May, down 1% from the same month a year earlier. By value, however, new lending rose 9% year-on-year to £175 million.
Over the three months to May 2026, the number of new agreements grew 13% compared with the prior-year period, reaching 10,878. The value of new business over the same period was £594 million, up 25%. On a 12-month basis, volumes rose 19% to 44,402 agreements, with lending value up 28% to £2.355 billion.
"May saw the second charge mortgage market report its first contraction in new business volumes since April 2025. Despite this, new business volumes grew by 17% in the first five months of 2026," said Fiona Hoyle (pictured right), director of consumer finance and mortgages and inclusion at the Finance & Leasing Association.
"Demand is expected to remain resilient over the coming months as households seek flexible funding for home improvements, loan consolidation and other major expenses. Second charge mortgages continue to provide a valuable option for consumers looking to manage their finances effectively."
The May dip follows a strong start to the year for the second charge mortgage market. In Q1 2026, new business rose 33% by value to £625 million and volumes climbed 22% to nearly 11,500 new agreements year-on-year. The 12-month lending total of £2.355 billion to May also builds on a longer-term milestone: annual second charge lending surpassed £2 billion for the first time since 2005 in the year to November 2025.
A key driver of demand is the rate-lock environment. Many cases involve borrowers part-way through fixed-rate deals with high early repayment charges who cannot qualify for a further advance, leaving second charge as the primary alternative. The product is also being used alongside product transfers where further borrowing is needed but mainstream options are closed off.
Industry figures have called for second charge to be treated as part of standard advice. "When the market is completing nearly 4,000 loans in a single month, that's not a niche product anymore — that's scale," said Matt Tristram, director at Loans Warehouse.
However, Sarah Stroud, director at Truffle Specialist Finance, warned that growth would stall unless more advisers actively consider second charge as a funding option, noting that some brokers dismiss the product without fully exploring its suitability.
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