Second charges boom for home improvements

by: Carmen Reichman
  • 08/09/2016
  • 0
The number of second charge loans taken out to finance home improvements doubled in the past two years, as fewer people used the products to consolidate their debts, master broker V Loans has said.

Sales data collected by the broker showed a third of loans were taken out to finance alterations to the home this year, compared with 17% in the first eight months of 2014.

Debt consolidation, on the other hand, which was by far the most popular choice for second charge loans in 2014, reduced from three quarters to 36% in 2016, only marginally more than home works.

Property purchase was the third most popular option among the broker’s clients, applying to 12% of the loans, up 10 percentage points on two years ago.

V Loans, which is part of the Key Retirement group, also observed a shift in the size of loans taken out over the past two years.

Between 2014 and 2016 the average loan size increased 83% to more than £67,000, at least in part reflecting the higher numbers of second charges that were used as mortgages.

V Loans believes the shift in the marketplace has been caused by the implementation of the Mortgage Credit Directive in March, which put first and second charge mortgages under one regulatory umbrella.

The regulatory change improved product turnaround times and customer protection and led to customers and brokers increasingly realising how second charges can replace remortgages, the firm said.

V Loans managing director Marie Grundy said: “The switch from debt consolidation to home improvement has been dramatic over the past two years and our own loan book demonstrates how the market is changing.

“It is particularly interesting to see the change in views among brokers about borrowers who can benefit from a second charge, such as customers who do not want to lose fixed or tracker deals by remortgaging, as well as interest only customers and people facing early redemption charges.”

V Loans was acquired by Key Retirement in October 2014. It is now the trading name of Key Secured Lending, which is an appointed representative of Key Retirement Solutions.


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