Borrowers with defaults increasingly using second charge

‘Defaults’ and ‘self-employed with one year’s accounts’ have reached the top five searches in second charge, according to criteria sourcing system Knowledge Bank.

The data suggests freelancers are looking to use equity in their home to secure debts or even to redevelop.

Or it could demonstrate the amount that those who are self-employed are struggling and so are looking to release extra capital from their homes to help with day-to-day living costs, Knowledge Bank said.

Matthew Corker, lender relationship manager at Knowledge Bank, said: “The increase in interest in defaults in the second charge market shows there is a trend of those with missed payments potentially looking to secure debt against their property.

“This combined with the interest in soft-footprints and furlough shows there are a lot of brokers working with clients who may be struggling financially.”

Bridging for limited companies

In the bridging market lending to limited companies reached the top five searched terms for the first time since May 2019.

This could be because businesses are looking to cover costs or to redevelop office space.

It might also hint that landlords are using bridging loans to renovate a buy-to-let property, Knowledge Bank said.

‘Heavy refurbishment’ was included in the top five searched terms in the bridging market for the first time since September 2020 – possibly due to the shift towards more home-based working.

Clients may be looking to undertake major redevelopments to add a space for them to work in.

Residential searches

However, November and December were the first months since the pandemic began that maximum LTV was not among the top searched terms in the residential market.

This was most likely due to lender confidence returning, with more 90 per cent loan to value (LTV) mortgages available.

‘Furloughed worker’ and ‘Soft footprints at the decision in principle (DiP)’ stage were in the top five terms.

Corker added: “The market is again shifting quickly in response to the changing environment.

“Confidence has been building with the number of 90 per cent LTV products available increasing in the residential market.

“This confidence may have been due to the approval of the vaccines and it remains to be seen if the latest lockdown will dent this fragile confidence.

“With another lockdown, lenders are certain to continue adapting criteria to keep up with the evolving market. It is now physically impossible for any mortgage broker to keep all the different criteria in their heads.”