While these increased lending figures may indicate fourth quarter activity, traditionally the busiest period of the year for specialist finance, they may also reflect a market that is settling and re-establishing itself after a year of increased regulatory pressures.
Brokers are finding new ways to grow the second charge market.
This includes operating more effective referral models and making better use of technology to correctly identify customers who may be better served by a second charge mortgage, as opposed to a remortgage.
Not only that, better sourcing systems are helping brokers see how this product can fit into their product suite offered to customers.
Second charge remains a drop in the ocean compared to the remortgage market, but it has the potential to be much larger.
This form of finance can genuinely serve customer’s needs that aren’t currently being met, such as those with complex circumstances and those looking for an alternative for a remortgage.
While Brexit is posing great uncertainty, this could have a positive impact on the seconds market as housing stock is at a record low which the Royal Institute of Chartered Surveyors (RICS) believes is “unlikely to improve”.
This lack of stock suggests home owners are remaining in their properties, rather than taking the potential financial risk of moving and are therefore more likely to make home improvements.
This is one of the most popular purposes for a second charge mortgage as customers can borrow large sums, up to £2m in some cases, perfect for larger scale improvements such as purchasing a new kitchen or extending a property.
Also, the instability caused by Brexit has seen a growth in longer fixed-term rates for first charge mortgages, with customers hoping to protect themselves from interest-rate rises in the future.
This presents another opportunity for second charge mortgages as some lenders offer no early repayment charges on seconds, whereas if a customer were to remortgage from their longer term first charge, they are likely to incur penalties.
Favourable first charge deal
Aside from the macro-economic factors impacting the seconds market, there is much to be done within the market itself to help it grow.
Education is still paramount and must be a key focus for lenders and master brokers alike to demonstrate to mortgage advisers that in some cases a second charge mortgage really is the better option.
This is especially true where the customer has a favourable first charge mortgage rate they would not like to lose or for those customers who have more complex circumstances that need a specialist lender.
Not only that, there is an onus on lenders and master brokers to make the second charge process easier and simpler, something that we are particularly focussing upon in 2019.
While it’s great news that the market continues to grow, the untapped potential is huge and it’s up to us as lenders and intermediaries to make the most of this opportunity.