Figures from the Finance and Leasing Association (FLA) showed that £139m in new business was completed during the month and 3,058 agreements were conducted. This represented annual increases of 53 per cent and 42 per cent respectively.
Fiona Hoyle (pictured), director of consumer and mortgage finance and inclusion at the FLA, said new business was at its highest level since September 2008, the year of the financial crisis.
In the three months to March, the value of new second charge business amounted to £349m, a 59 per cent rise on the same period in 2021. A similar increase was seen in the number of new agreements which totalled 7,834 during the quarter, which was a 51 per cent jump.
Hoyle added: “The market helps consumers in a variety of ways, including funding home improvements and by better management of their finances through loan consolidation.
“As always, any customer worried about meeting payments should speak to their lender as soon as possible to find a solution.”
However, Loan Warehouse’s secured loan index showed this was down by £15.1m on the £155.5m lent in March.
There were 3,000 completions in April, a seven per cent decrease on the 3,237 completions in March.
Loan Warehouse noted the 19 working days in April were fewer than the 23 in March which resulted in a nine per cent dip in overall volume. Despite this, the daily average lending amount in April rose compared to the previous month.
Lending in 2022 has now passed half a billion and currently stands at £545,913. Loans Warehouse said lending was on track to surpass £2bn in a 12-month period for the first time since 2007.
Average completion times were flat at 22 days, as was the average 21 year product term. The loan to value (LTV) split was also static, with 84 per cent of loans being below 85 per cent LTV.
The use of second charge loans remained the same when compared to March with the majority being used for either consolidation or consolidation with home improvements. These accounted for 40 per cent of loans apiece.
Matt Tristram (pictured), co-founder and director of Loans Warehouse, said: “As the increase in second charge lending continues, lenders are working hard to maintain service levels and our own experience has seen that most have now increased capacity as the record lending levels only look to continue.
“Second charge loans are being more widely used. With record low rates and variety of products, they are clearly now at the forefront of more mortgage professionals’ minds than at any point in Loans Warehouse’s 16 years of trading.”
Lawrence (pictured) worked his way up from being a branch manager and business development manager (BDM) at Leeds and Holbeck Building Society in 1972, before moving to The Mortgage Corporation Ltd in 1987 as regional sales manager, gradually working his way up through various senior sales positions at lenders including the Yorkshire Building Society.
He joined Citigroup in 2000 under Citifinancial/Future Mortgages, where he says he took up his first role in second charge mortgages.
To learn more about the sector, he decided to work with Norton Finance for a month where he says he “learned how a secured loan could benefit a customer, the loan process from application to completion and how to make an application fit the published lending criteria.”
He added: “This short period proved to be a turning point in my career as I was allocated many of the UK-based master brokers and asked to develop increased business levels from them.”
‘I’ll miss the buzz’
In 2005 Lawrence was promoted to national accounts manager secured loans at Citigroup, before moving to Norton Home Loans in 2008, where the lender says “he was instrumental” in launching first and second charge mortgage lending.
Lawrence, said: “I retire leaving an exceptional team of managers and I would like to think I have in some way trained and supported them in their important company roles. The last 14 years have been the happiest work moments in my life and I will definitely miss the buzz.”
Paul Stringer, managing director of Norton Group, paid tribute. He said: “Steve has always been one of our most valued employees, carrying out his role in his usual conscientious and dedicated way he has built up a reputation as one of the most well-liked and respected sales managers in the industry.
“He will be missed not only by his colleagues but also the large number of friends he has made over the years within the company and the broker market in general. We wish him all the best for the future.”
Speaking to Specialist Lending Solutions, managing director of Truffle Specialist Finance James Rainbird (pictured), said that the firm had had a record quarter for second charges in its most recent three-month period.
He said it was “happy with its direction of travel” in the space, however, he said that the firm was looking to ensure it had the “right resource going forward to keep pace with demand”.
“There is strong, and growing demand in this product space, and it’s up to us to ensure we are effectively resourced to continue to meet that demand,” Rainbird noted.
Rainbird said that this is an area of growth as consumer awareness of the product increases and lenders continue to bring out new product offerings.
He also pointed to the withdrawal of further advances and remortgages as a potential “boost” to the second charge mortgage market.
Rainbird said that it could be “very difficult” for new businesses to enter the market without “real experience and lender relationships”, adding that lenders’ back-office teams could be “challenging”.
He said that the firm’s underwriters were “working tirelessly” chasing consents, redemptions and building society questionnaires, and that this could slow the process as a lot of bank staff were still working remotely.
“The volume the banks are receiving as well is high. You’ve got to have a good back-office team, good CRM systems in place to ensure that you’re getting those results then for the consumer and for the introducing brokers,” Rainbird noted.
He added that “strong working relationships” with lenders, surveyors and accountants were “absolutely key”.
Rainbird continued that bridging and commercial was a “key area of growth for the firm” and that locally it was looking to grows its first charge and protection division as it was “actively recruiting in that area”.
Based in Penarth, which is just outside of Cardiff, Rainbird said that several lenders had left the high street, which presented an opportunity for Truffle to fill the gap.
He said that Penarth was predominantly made up of over-40s, professionals and quite an affluent area, with many still wanting to have “face to face” meetings.
Rainbird said that whilst it was always looking for the “right candidates” to grow its advisory team, this had to be balanced with back-office support.
“You can write as much business as you want, but if you don’t have the back office support and relationships then you’re going to struggle. So yeah, there’s a balance for us between advisers and underwriting,” he said.
Investing in CRM system to give brokers ‘accountability and better reporting’
Rainbird said it was “investing substantial funds” into a new CRM back-office system, which will “help streamline our internal process” and give “brokers some accountability and better reporting, a case tracking system as well, where they can actually upload documents”.
He added that this would “minimise the amount of traffic” that’s coming into the office, such as emails and phone calls.
“Technology is hugely important for our business going forward and for our introducing brokers as well, if we can make it increasingly attractive for them. It helps in terms of reporting, incentives and client retention– if we have greater automation, it incentivises our introducing brokers to stay with us,” he explained.
Affordability challenge for consumers
Rainbird said that Truffle had seen an increase in applications across all product sectors but was not able to place a number of them due to affordability issues.
He cited several factors that were impacting affordability, including interest rate rises and cost of living increased.
“We’re often still able to find solutions for clients in those circumstances. That’s a positive in itself because we are saying to our introducers, who have those clients, that we are able to help them place those deals,” he noted.
The business offers specialist first charge residential, second charge, first and second charge buy-to-let, bridging, equity release, development finance, commercial finance and mortgage protection business.
“Affordability has always been an issue. But, thankfully, we’ve got lenders that are proactive, and they’re always looking at ways they can perhaps tweak their criteria in order for us to continue to write business and for consumers to have the right products.”
Rebrand has led to increase in new business
Rainbird said that there had been “incredible reception” from existing brokers, the media and local businesses following the rebrand to Truffle Specialist Finance.
He said that there had been a perception from local businesses that the firm only did second charges, unsecured and payday loans, however, this had now changed.
Rainbird said that it had seen an increase in new accounts since the change.
“I think from where the business was and has come from, to where we are today, certainly as an industry and as a business the word loans has become antiquated. If we have a look at the suite of products that we offer, the word loan is not used,” he said.
“I think it was perfect timing for us to just to bring the brand up to date and for it to also reflect on our time in the industry, our professionalism and our commitment to the industry as well.”
Mark Dyason, owner of Edinburgh Mortgage Advice, said that the rise in popularity of long-term fixed rates, along with customers looking to manage their finances due to the rising cost of living, has led more people to consider second charges.
“Lenders whose further advance products, criteria, or processes are not working for clients have also meant that more are coming back asking how other lenders can help them,” he said.
He identified debt consolidation and home improvements as the main use of the funding, but this varies – one enquiry of note was from a musician looking to purchase a cello.
Dyason said that there are sufficient lenders in the space, but if the sector continues to grow then first charge lenders are “bound to look at this market with its margins and lending opportunity as somewhere to deliver growth.”
Second charge lending reached £155m in March, according to Loans Warehouse, setting a new post-credit crunch record. The report mentions that the majority of loans taken out in February were for debt consolidation.
Finance and Leasing Association figures also show that second charge new business volumes were up 59 per cent in February.
Scott Taylor-Barr, financial adviser at Carl Summers Financial Services, said that second charges are a “vitally important tool in the broker’s toolkit.”
He added that remortgages or further advances are normally the go-to options as they tend to be the “lowest cost options” for the client.
However, he notes that clients tied in to their current mortgage and lender won’t normally agree to additional borrowing when a second charge could be the “best way to meet the client’s needs”.
According to Criteria Brain, 54 per cent of listed residential lenders will potentially accept an application where there is a simultaneous completion of a second charge. This is equivalent to around 37 lenders.
Taylor-Barr added: “With rising interest rates now a factor, it may also be that the clients’ existing mortgage deal is so good compared to the rates now available that a full remortgage becomes unattractive.
“In this case, keeping the existing deal and taking the extra money on a second charge, despite the higher rate and fees, actually works out more cost-effective overall in situations where taking the extra borrowing from the current first charge lender isn’t possible.”
Use a packager and be aware of high fees
Dyason recommends that clients and introducers talk to experts in the second charge sector so that cases can be “packaged quickly and found in a timely way”.
He added: “Seconds are close to firsts but have enough differences to mean that using a packager will smooth the path for both broker and client.”
Taylor-Barr said seconds would generally be at a higher rate than a standard mortgage, with higher set-up fees too.
Lewis Shaw, founder at Shaw Financial Services, said that second charges were a “growing area” that could be used to fund home improvements or debt consolidation.
“However, caveat emptor (let the buyer beware), second charges come with big fees, higher rates, and not all lenders are happy about them. If they can be avoided they should be. If it’s a necessity then ensure you take professional advice before signing on the dotted line,” he said.
Diamond will join Spring Finance from UTB on 26 July with the aim to boost the lenders growth in the specialist market.
Diamond has worked at UTB for nearly nine years, where he is currently head of bridging finance, having previously served for over seven years as commercial director for bridging. He also has experience at other specialist lenders and finance providers, including five years as director and CEO of Cheval Bridging Finance.
Spring Finance said other senior hires would be announced in coming months.
Earlier this year, the lender launched a bridging pilot scheme to a select cohort of brokers with a view to launch to the wider market in Q2.
Andrew Bloom, owner of Spring Finance, said: “We are delighted that Gavin is joining and everyone is looking forward to him leading the team. It speaks volumes for Spring’s ambitions that this role attracted someone of Gavin’s calibre and experience.”
Diamond (pictured) added: “I am really happy to be joining Spring Finance at this tremendously exciting time. Following the recent financial investment, I see a real opportunity to use my experience to lead and grow the team to become a significant player in the wider specialist finance industry.”
Mark Stokes, executive director and chief commercial officer at United Trust Bank said: “Gavin has helped us to build a resilient and successful bridging operation and although we’re sorry to lose him we’d like to wish him well in his new venture.
“Our search has already begun to identify the individual who can lead UTB’s bridging business and deliver our plans for the future. In the meantime, our strong team led by Owen Bentley and Nikki Brett will ensure we continue to take the business forward and ensure continuity during the change of leadership.”
Borrowers whose homes have an EPC A rating will receive a 0.5 per cent “green discount” on new second charge mortgage rates. B-rated homes will get 0.3 per cent off, and C rated property will get a 0.2 per cent discount.
Tandem acquired Oplo in January 2022 with the aim of making the lender’s offering more energy efficiency focussed. As part of the deal, Tandem gained £1.2bn in total assets, £1bn of funding and 171,000 customers.
Personal and home loan provider Oplo launched in 2009 to serve borrowers who were turned away from the high street. Tandem said it hoped to broaden its offering to include first and second charge mortgages.
It also plans to launch ‘Greener in Tandem’, a greener living awareness campaign to help customers understand their home’s current emissions, as well as what, where and how they can reduce it.
Steve Beard, managing director for mortgages at Tandem Bank, said: “This is an exciting step for Tandem. Climate change is one of the most important issues we’re facing in society today. Our customers are increasingly worried about doing their part, and with 15 per cent of carbon emissions coming from our homes, the time to act is now.
“Tandem is proud to play its role in supporting our customers make greener and fairer choices.”
He added: “Today’s launch is an exciting and important first step, and we hope to see customers doing more to improve their home’s EPC rating. This is the first step in our planned improvements for greener mortgages – we’ve lots more to do as we continue our mission to become a greener digital bank.”
The lender said it had originated £1.8bn of second charge mortgages in total and £800m worth of loans had already been redeemed.
It has also closed five securitisations under its Castell securitisation platform.
Pepper Money offers second charge mortgages between £5,000 and £1m on fixed, discounted and variable rate options. Repayment terms can range between three and 30 years.
Borrowers can access up to 100 per cent of the property’s value, minus the existing mortgage balance subject to a satisfactory valuation.
It launched a range of second charge mortgages in January this year following the completions of its integration with second charge specialist Optimum Credit.
Pepper Money bought Optimum Credit in 2018 and at the time it had a second charge loan book worth over £450m.
Matt Blake, treasurer at Pepper Money, said that Finance and Leasing Association’s figures for 2021 showed that second charge lending had totalled £1.1bn, therefore hitting the £1bn mark showed that the lender was an “important player Pepper Money is in this market”.
He added: “Throughout our lending we have maintained ultra-low levels of loans in default and repossessions, and the majority of lending continues to be for either home improvements or debt consolidation.
“With the ongoing cost of living squeeze that is motivating more customers to take a more proactive approach to managing their finances, we expect debt consolidation to be a big theme in the coming months, providing brokers with a good opportunity to help their clients take greater control of their monthly expenditure.”
The lender said that it now made up 50 per cent of its loans, continuing a trend since the company was launched in 2014.
According to the Finance and Leasing Association, the second charge mortgage market reported the highest monthly level of new business volumes for two years and has now returned to pre-pandemic levels of new business by both value and volume.
The company reported that its second charge lending had “remained consistent” through the pandemic.
Rob Johnson, head of underwriting at SoMo, said: “At the back end of 2020 we were one of the few lenders to keep our doors open for new business. This enabled us to grow our pipeline, hence the record number of completions and lending over the last year.”
He added that second charge lending was a “niche market” with a lot of potential in London and South East.
Johnson continued: “We want to educate brokers about the potential of second charge lending. The message coming from our network is that they’re surprised by the demand and delighted that this type of loan can be used for a variety of purposes.”
He explained that post-pandemic, many businesses were looking to raise funds via second charge mortgages to “keep their businesses afloat, and to jump on new opportunities that have arisen”.
Examples cited include purchasing a buy-to-let property, paying off a tax bill or expanding a business with new premises, materials, or marketing.
“As a business overall, we’re lending more month-on-month and year-on-year and we see second charge loans as an important part of our growth strategy,” he said.
“A lot of lenders won’t look at second charge lending, but we’re very good at it and have robust systems in place to minimise risk. It makes sense to concentrate on this to help support our growth.”
For second charge business the lender can offer up to 70 per cent loan to value (LTV) against open market value, and rates from 0.6 per cent per calendar month.
SoMo added that this year it would open an office in London so it could work with business development managers and underwriters to take advantage of the second charge market.
