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What’s first place in second charges?

by: Mark Posniak
  • 26/10/2012
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What’s first place in second charges?
We recently mined our historical client data to get a collective picture of why people are taking out second charges and how this may have evolved over the years — well, since 2010 anyway.

Easily the two most popular reasons for taking out a second charge since 2010 have been to raise funds for a deposit on a buy-to-let or for a business.

This didn’t really come as a surprise. After all, buy-to-let has been booming in recent years, mainly due to the fact that first-time buyers have been kept off the ladder by stringent criteria and hefty deposits.

More and more people have piled (back) into the sector in order to enjoy the high yields on offer and that showed through in our analysis.

It’s also common knowledge that the high street banks haven’t been lending to business, especially small business, which they deem an unacceptable risk.

We’ve had Project Merlin and countless other initiatives, and none, as yet, have got anywhere near to stimulating the banks to lend. Even the Funding for Lending Scheme appears to have flopped when it comes to business loans.

This explains why people are looking to alternative forms of finance to raise funds for their businesses, which include second charge loans.

If you’re sat on a property with a large amount of equity, but repeatedly get knocked back by your bank, then it’s understandable that you will look to other channels.

Second charges can be faster to secure and cheaper than some alternative forms of finance and as brokers rediscover their potential I’m sure this area of the market will continue to grow.

What I can say is that for the right borrower with the right property, we will grant second charges on pretty much anything.

For example, we recently did a £6m second charge for a client who wanted to buy two (yes, two) classic cars for his classic car business.

As soon as he’d sold them, clearly making a profit himself in the process, he paid us back. Once again, this peculiar loan shows that if the deal stacks up, we will do it, however leftfield it might seem at first.

Mark Posniak of head of marketing and operations at Dragonfly Property Finance

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