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Second charge lending activity retreats in May

  • 14/07/2015
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Second charge lending activity retreats in May
Yearly secured lending rose by 12% to £73m in May but retreated slightly on April’s figures, dropping by 1%, findings show.

The latest Enterprise Finance secured loan index showed that the annual second charge mortgage total now exceeds £818m, an 18% increase on the period a year earlier.

According to the index, the average loan size in the second charge sector dropped to £59,358 in May after rising to £67,468 in April, but typical transactions are still almost 20% larger than a year ago.

Home improvements remained the most popular reason for taking out a secured loan, but an increasing number of borrowers took out second charge finance for a mix of reasons. Almost a third took out a second charge loan for renovations as well as consolidating existing debts, while others used capital for business purchases and buy-to-let deposits.

Harry Landy, director of Enterprise Finance, said: “Despite the dip, we are still comfortably above the levels experienced a year ago and significantly higher than the longer-term average.”

Landy explained that as the sector was enjoying sustained growth, May’s slight dip in lending was unlikely to negatively affect figures for the year.

“The annual lending figures prove that secured lending is a sector heading in the right direction, with the £818m lent in the last year easily eclipsing the £694m issued in the 12 months to May 2014.

“Indeed, this yearly total has almost doubled over the past three years showing that demand for consumer credit has continued to increase as the country has extracted itself from economic turmoil – well and truly spending its way out of recession,” he said.

As remortgage rates continually improve, Landy pointed out that homeowners who may have previously turned to secured loans for support are now able to remortgage with greater ease.

“Competition among secured loan lenders has seen rates become ever more attractive, but they still struggle to compete with the interest rates currently on offer from remortgage providers. Second charge mortgages still represent a viable option for many, but borrowers have never been more spoilt for choice.”

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