Improvement on conversion, offer speed and completion needed for second charge growth – Tolfree

  • 06/01/2022
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Improvement on conversion, offer speed and completion needed for second charge growth – Tolfree
In order for the second charge market to grow there needs to be more significant changes to the market's framework, operational processes and application journey than there has been currently.


Speaking to Specialist Lending Solutions as part of the Get to Know Your British Specialist Lending Award Winner series, United Trust Bank’s mortgages director Buster Tolfree (pictured) explained that second charge market growth was currently largely led by home improvements and debt consolidation and said there was no evidence this would materially change in 2022.

Tolfree said that as a result, opportunities for growth under the current framework was dependent on consumer demand for home improvements and consolidate their debt.

He said: “I would say real growth opportunity greater than that possible through incremental increases in consumer demand, requires the market framework or operational processes and application journey to change more materially than it has to date.

“This means improving conversion, as well as speed to offer and completion, likely through enhanced digitalisation or streamlining of referencing and application data verification.”

Tolfree added that given UTB’s growth to date, it planned to expand its team, which combined the bank’s residential mortgage and second charge propositions, over the next few years to “reflect the continued growth of our business”.

He also said the second charge market had been “resilient”, despite being smaller than other specialist lending sectors.

Tolfree said the second charge market had consistently sat around £1bn in the few years before the pandemic, but during 2021 had seen greater monthly lending numbers than at any time during the last five years.

He added that it was likely that the Finance and Leasing Association would report monthly origination of over £140m in November and said these kinds of numbers had not been seen since pre-2008.

Tolfree said: “In my view, a key driver of this is the pent-up demand generated during the pandemic, combined with the increase in working from home driving up the desire for home improvements. What will be really interesting is whether this upward trend continues in 2022 or not.”


Challenges for the market

Tolfree said the biggest challenges looking ahead were the “great unknown”, pointing to the impact of the Omicron variant with its work from home directives and restrictions on social movements.

He said: “The difference, if not realisation this time, is that I think there is a greater feeling that this is likely to become a regular yearly winter occurrence for longer than we all hoped.

“The mid-term impact of this is unclear, but ripples to inflation, unemployment and a rising Bank of England are realities we face. For most of those aged under 30-35 this is something they have never seen before given how low interest rates have been since the Global Financial Crisis in 2008-12.”

Tolfree said whilst this may be “difficult for many” the specialist finance market was “innovative”, and every difficult period presented new opportunities.

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