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Borrowers seek second charge mortgages as cost of living rises – Knowledge Bank

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  • 16/02/2022
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Borrowers seek second charge mortgages as cost of living rises – Knowledge Bank
Borrowers are using second charge mortgages to mitigate the rising cost of living, a data analysis has found.

 

Knowledge Bank’s latest criteria tracker showed that ‘capital raising for debt consolidation’ featured heavily in broker searches in January, suggesting a need for mortgages to address financial concerns. 

Searches for ‘mortgage or secured loan arrears or defaults’ were also among the top five for second charge brokers, indication people who had missed payments were looking for these products. 

Broker searches in the second charge market were mirrored in the residential sector with ‘defaults – registered in the last three years’ coming into the top five most-searched terms in January for the first time since last September. 

Additionally, ‘time in current employment’ made the top five searches for residential brokers for the second month running, suggesting newly employed borrowers were in need of mortgages. 

January also marked the nine consecutive month where ‘maximum age at end of term’ was the most searched among residential brokers, indicating rising house prices were causing borrowers to stretch terms to reduce monthly payments. 

‘First-time landlord’ and ‘first-time buyer’ were terms which featured in the top five for buy-to-let brokers. Knowledge Bank said this hinted at the market attracting new investors. 

 

Specialist lending

 

Searches in the bridging market primarily focused on ‘regulated bridging’ for the third consecutive month, meaning the term has consistently been in the top two searches for 18 months. Knowledge Bank said this could be down to borrowers turning to bridging loans for quick purchases, or if chains have collapsed if a buyer pulled out. 

Brokers with bridging clients were also looking for ‘minimum property value’ in January and these searches suggesting bridging loans were being used for smaller projects or purchases, such as properties in need of renovation. 

Searches in the commercial sector centred on ‘semi-commercial properties’ reflecting the increased popularity of mixed use developments. 

Matthew Corker, operations director at Knowledge Bank said the searches demonstrated the financial difficulties facing borrowers in the UK.  

He added: “While lockdowns appear to be a thing of the past, the economic impact of the pandemic is likely to continue impacting borrowers for years. The cost of living is rising significantly and some borrowers are turning to second charge products to help cope with the financial pressures. 

“At the end of the furlough scheme there were a number of brokers searching for time in employment, and these searches have continued. Earlier in 2021 employees may have held off moving due to economic uncertainties, however it appears the jobs carousel is now in full swing.” 

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