This was contrary to expectations at the start of last year when many commentators believed the implementation of the Mortgage Credit Directive (MCD) would propel the market forward due to brokers being compelled to present second charge mortgages as an option to clients.
In the run-up to the MCD implementation in March 2016, the second charge market actually hit record lending figures, posting £86m for that month alone.
However, the immediate effect of its implementation was one of disruption and March’s record high was followed by a 41% reduction in April at £51m. Enterprise Finance said the UK’s decision to leave the European Union proved another disruptor, causing investors to take stock and harming the market’s recovery.
Although the market continued to grow following these disruptions, the rate of expansion decelerated steadily throughout the second half of 2016 with 12-month year-on-year growth falling from 24% in June to 4% in December.
On a more positive note there was a significant fall in the number of second charge mortgage repossessions in 2016, dropping to 144, a fall of 37% from 2015. The rate of second-charge mortgage repossessions, as a percentage of average outstanding agreements, has fallen from 0.34% in 2009 to 0.07% in 2016.
Harry Landy, sales director for Enterprise Finance, said: “Overall, 2016 has been a transition year for the second charge sector. However, the market has shown its resilience, and we believe there is cause for optimism in 2017. Firstly, the quality of second charge mortgages being issued now is much improved – something reflected in the fact that repossessions are down considerably compared to 2015 – and as more brokers begin to consider second charge for their clients, we expect that we will see growth pick up again.”