Second charge lending on track to hit £1bn this year – Loans Warehouse
According to Loans Warehouse’s managing director Matt Tristram, the second charge market last reached this figure in 2019. He said the £1bn target was a “benchmark for success for second charge lending”.
Its Secured Loan Index report highlighted that in October the volume of second charge lending came to around £123.6m, which is up £13.4m on the previous month, and the highest recorded under FCA regulation. The previous peak was in 2019 at £118m.
These figures were boosted by the addition of Selina Finance to the market and the removal of pandemic restrictions.
Earlier this week Selina Finance launched an 85 per cent loan to value (LTV) second charge range.
Completions in October also grew by 10 per cent from September to 2,839, which is a record high.
Consolidation loans made up around 46 per cent of loans offered in this period, which was followed by consolidation and home improvements at around 30 per cent and home improvements at around 19 per cent.
The average completion time for second charge loans in October was 17 days, which is 1.7 days faster than September. The average term for a second charge loan was 18.8 years.
Around three quarters of loans offered in October were below 85 per cent LTV, which the report said was because first charge lending at higher LTVs had become more limited during the pandemic. Borrowers’ equity, therefore, was limited and second charge became an alternative method for raising capital.
The proportion of second charge loans below 85 per cent LTV was higher during the pandemic when first charge higher LTV lending was more limited, according to Tristram.
The report collates second charge lending figures from Optimum Credit, Oplo, United Trust Bank, Together Money, Masthaven, Norton Home Loans, Equifinance, Evolution Money, Spring Finance and Selina Finance.
OMS completes API integration with Evolution Money for second charges
OMS users will be able to directly access Evolution Money’s second charge products and get a decision in principle (DIP) without having to re-enter information.
The API will also improve support and speed up the advice process, sourcing and delivery, according to OMS.
Manchester-based Evolution Money, launched in 2011, has lent more than £260m to over 26,500 customers in the UK. It has also approved over 5,700 loans in the last 12 months.
Neal Jannels (pictured), OMS managing director, said that competition was increasing in the second charge sector with more lenders leveraging technology to streamline their propositions and improve their service.
He added: “Evolution Money is an exceptionally tech-savvy lender which is already leading the way by embedding AI and machine-learning into the heart of its processes to offer advisers – and their clients – access to better products and to make stronger, more informed credit-risk decisions.
“This certainly made our job easier when it came to the actual integration and this tech focus will ensure that it’s a relationship which will flourish now and in the future.”
Jim Robinson, head of strategic partnerships at Evolution Money, said it was “extremely excited” to integrate with OMS and it opened up an avenue for advisers to obtain a DIP with ease.
He added that a smoother customer journey and making sure re-keying information was “thing of the past” was a “win-win situation for everyone”.
OMS completed an API integration with West One for second charge business, and it has integrated with platforms Iress, Twenty7Tech, iPipeline and Knowledge Bank to offer users product sourcing, protection sourcing and criteria sourcing.
The OMS platform has also been adopted by Y3S Loans and will be used alongside the Y3S second charge quotation and application system Lenderlink.
Selina Finance launches 85 per cent LTV second charge range
Two-year, five-year and variable rate products at 85 per cent LTV are now available, all with a rate of 6.3 per cent. The maximum loan or credit facility size is £500,000, in line with all Selina’s products above 75 per cent LTV.
The 85 per cent product can be secured on a main residence or second homes, and a Hometrack AVM is accepted on properties valued up to £500k.
Stacey Woods (pictured) key account manager, said: “We’re excited to be adding to our product range as 2021 draws to a close.
“There’s been a lot of demand from our intermediary partners for an 85 per cent product, so we’re delighted to be able to offer this before the festive season kicks off.”
The new products have no early repayment charges (ERCs). Selina Finance provides flexible second charge mortgages that can be used as a standard term loan or a credit facility.
Pepper completes £350m second charge securitisation
The transaction, originated by Optimum Credit, is the firm’s largest second charge issuance to date.
The securitisation, which the firm said received strong demand, is the lender’s fifth issuance in its secured loan series of transactions called the Castell programme.
Pepper bought Optimum Credit in 2018 from Patron Capital. At the time of purchase, the Cardiff-based second charge firm had a loan book valued at more than £450m.
Pepper is anticipating a rise in demand for second charge borrowing next year. The lender said this year’s second charge business was dominated by borrowers who wanted to consolidate their debts, a trend that is expected to increase if interest rates rise making short-term unsecured borrowing more expensive.
Laurence Morey (pictured), chief executive at Pepper Money, said: “The demand for this securitisation reflects the strength of the underlying loan book and the quality assets we are able to generate through our second charge platform. We expect customer demand for second charge mortgages to grow next year as we continue to develop our product range to meet the changing needs of our customers.”
Treasurer Matthew Blake added: “We received strong investor appetite for the securitisation which was executed as part of a refinancing of the funding platform during 2021. We will seek further funding diversification during 2022.”
Lenders are responding to increased demand for second charges – Simpson
In general, the trend we have seen is that the shock of the pandemic has encouraged many people to be more cautious with their money. So, even while the home moving market was booming, many clients decided to increase the footprint of their existing property rather than engage in the competitive market and the associated costs of moving.
It’s definitely now the case that many people are seeing home improvements as a cost-effective way of progressing up the property ladder.
We’ve also seen many customers who have had to tighten their belts and live off of a reduced income for many months and this has jolted them into doing something to sort out their finances.
Unsecured credit has been so easy to access for so long and many people have taken on big commitments. The pandemic has created a lot more urgency for people to lower their outgoings.
Whereas borrower appetite remained strong throughout the pandemic, lender appetite definitely dipped last year. However, we’re now seeing many lenders returning to the product ranges they offered before Covid and often the rates are now even better.
It definitely feels like lenders want to lend at the moment.
Potential hurdles and forecast for next year
The one potential hurdle will be the impact of government support schemes coming to an end and whether this has a notable effect on unemployment. However, the uncertainty around this will be short lived and I think we will know pretty quickly what effect this will have.
It’s unlikely to change lender appetite overall, but it will make it harder for those clients whose finances suffer as a result.
However, while this may reduce demand amongst some potential customers, at the same time, we are now seeing client applying for second charge mortgages who were previously unable to access the market because they were on furlough or have had reduced income. This is likely to offset any reduction in demand caused by a potential increase in unemployment.
As we move into next year, I wouldn’t be surprised if we saw more lenders coming into the market, or broadening their proposition, to provide even more options for customers. The second charge mortgage market definitely continues to offer new opportunities to customers, to lenders and to brokers.
OMS finalises API integration with West One for second charge business
OMS users will now have direct to access to West One’s second charge products, which cover both residential and buy-to-let.
Users can secure a full decision in principle without the need to rekey data and the two-way API can speed up the advice, sourcing and delivery process.
OMS offers users access to residential, buy-to-let, second charge, equity release, bridging and commercial loans through its processing platform as well as general insurance and protection products.
It has also integrated with platforms Iress, Twenty7Tech, iPipeline and Knowledge Bank to offer users product sourcing, protection sourcing and criteria sourcing.
Neal Jannels (pictured), OMS’ managing director, said: “With a growing number of homeowners seeking to unlock equity from their property without disturbing their first charge mortgage arrangements, we are experiencing a huge amount of activity and interest being generated within the second charge marketplace.
“This is leading to more conversations with tech-savvy lenders such as West One who are looking to integrate their second charge propositions with the OMS platform. And we look forward to working closely with Marie and the team to help our users to service this growing demand in an even more effective and efficient manner.”
Marie Grundy, West One Loans’ managing director of second charges, said that the integration would offer “significant benefits” to its broker partners and customers.
Second charge agreements more than double in August ‒ FLA
According to the latest figures from the Finance & Leasing Association (FLA), there were 2,314 new second charge agreements in August, just over double the figure from the previous year. Last year, the market recorded 1,134 new agreements for August.
This continues a trend of growth, with 7,054 agreements in three months to August, more than double the figure of 2,761 during the same period last year.
In the 12 months up to August there were 22,880 new agreements, which was up five per cent on the year before.
The value of new business for August was pegged at £95m, up from £43m during the same month last year but on a par with £102m in August 2019.
For the three months up to August the value of new business was estimated at £297m, and for the 12 months the value was £956m.
FLA’s director of consumer and mortgage finance and inclusion Fiona Hoyle (pictured) said: “The second charge mortgage market continued its recovery from the pandemic in August. The market has reported more normal levels of new business in recent months which we expect to continue in the final quarter of 2021.”
Optimum Credit hires Batte as southern BDM
Batte worked at Shawbrook Bank for around three years previously, most recently as a senior relationship manager.
Prior to that he worked at First Trust Finance for nearly three years as a sales manager, working at Optimum Credit before that as a broker account manager for under a year and First Trust Finance as a senior underwriter for nearly eight years.
In his role he will work with southern brokers to help them meet clients’ capital raising needs. The company offers variable, fixed and discounted second charge mortgages worth from £5,000 to £1m.
Simon Mules, Optimum Credit’s commercial director, said: “I’d like to welcome Matthew back to Optimum Credit. He has a great pedigree in second charge lending and will be a huge asset to our business and brokers.
“We continue to lead the way in this market, and we have ambitious growth plans for the business as part of the Pepper Money group.”
Pepper Money bought the second charge lender in 2018.
Know Your BDM: Pauline Rylands, West One Loans
What locations and how many advisers and broker firms do you cover in your role?
I currently cover the whole country and support our key partners and their teams.
How have you changed the way you establish and maintain a good relationship with brokers in the pandemic?
Like most people, lots of Teams meetings and telephone calls which I’ve pre-booked to make sure my brokers get the most out of our time together.
What personal talent/skill is most valuable in doing your job?
Being organised and able to adapt quickly. This job is like a moving target and whilst you have to be organised, you also need to be able to change plans swiftly at the drop of a hat to accommodate people and changes.
What personal talent/skill would you most like to improve on?
The ability to complete admin. I think this is an issue for most salespeople. I constantly put it to the bottom of my ‘to do’ pile and will find anything else possible to do to avoid actually doing the admin. The mad thing is that when I force myself to do it, it never takes as long as I think it will and it’s never as bad as I believe it will be.
Where would you rather be stuck, in bumper-to-bumper traffic or back-to-back Zoom calls?
A mix of both really. I’ve always got a list of things to do and use the time in the car – which can be many hours – to make the calls and catch up with people. Thank goodness for Siri. Zoom calls are great for keeping up to date with people more regularly than I might normally, due to the area I cover.
What’s the best bit of career-related advice you’ve ever been given?
“Be the best version of you that you can be” and “don’t ask others to do anything you wouldn’t do yourself”.
Both have served me well. The first has pushed me to always work hard and stay until the job is done. The second has helped me build great relationships and has promoted teamwork – when others can see you’re willing to do anything, they often naturally follow suit.
What is the most quirky/unique property deal you’ve been involved in?
A property that was originally a hotel and the clients wanted to convert it into their home. The plans were incredible and the house was huge. It had a full chef’s kitchen for entertaining as well as a family kitchen for every day. As you can imagine, it was very extravagant.
What was your lockdown coping strategy?
Box sets. I watched very little live TV as I found it quite depressing and to be honest, I’ve never gone back to it. Give me a good crime series and I’m hooked and will completely binge them. My family go nuts as very little gets done around the house as a result!
What was your motivation for choosing business development as a career?
I genuinely love helping people and solving issues along with doing something different every day. This job fulfils that all. I’m like the three-year-old child who constantly asks “why?”.
It drives people mad, but also breaks the “that’s the way we’ve always done it” mode. There’s always another way to look at things and if that helps my brokers and the business, I’m happy.
If you could do any other job in the property sector, what would it be and why?
Property development. I love a good project and designing or creating spaces for others to enjoy and admire. When I redecorate a room in my house, I rip everything out and normally start again with it, creating a modern space whilst respecting the age of the property – and I’m nosey.
What did you want to be growing up?
A police officer. That couldn’t be further from what I do now.
What’s your favourite face mask design/pattern to wear?
I have a paw print mask which I bought in support of a pet store. It makes people smile.
And finally, what’s the strangest question you’ve ever been asked?
Would you rather have fingers for toes or toes for fingers? I meet the weirdest people at times.
Second charge lending pegged at £95.6m in August
According to Loans Warehouse secured loan index, second charge lending is £5.6m lower on the previous month, but more than double the amount from August last year.
However, the report said lending was at a three-month average of over £100m for the first time since the pandemic started.
Completions in August came to 2,344, which was four per cent down on the previous month.
For the year-to-date, second charge lending had reached £595m in second charges completed and Loans Warehouse said new lending figures continued to improve.
Most loans were consolidation loans, which accounted for 47.5 per cent of completion. This was followed by consolidation and home improvements at 29.4 per cent and home improvements at 18.2 per cent.
Average completion time improved slightly to 17.1 days, half a day faster than July.
Around three quarters of loans were below 85 per cent loan to value (LTV), with the remaining quarter above 85 per cent LTV. The average term also sat at nearly 17 years.
The report collates information from second charge lenders including Optimum Credit, Oplo, United Trust Bank, Together Money, Masthaven, Norton Home Loans, Equifinance, Evolution Money, Spring Finance and Clearly Loans.