Together and Optimum Credit update second charge offerings
Together has launched a limited edition two-year fixed prime plus deal with an interest rate of 4.29 per cent for capital repayment and 4.79 per cent for interest only.
It has also cut the rate on its five-year fixed second charge products by a full one per cent to 4.99 per cent for capital repayment and 5.49 per cent for interest only.
The lender has also increased the maximum LTV for its second charge term products, which are initially available for three months, from 70 to 75 per cent.
And Together has reduced the number of supporting documents brokers must submit during the personal and commercial finance application processes — by updating what document checklists its broker portal requests and streamlining the credit search process.
Sundeep Patel, director of sales at Together, (pictured) noted that self-employed customers, freelancers and contractors, those on zero-hour contracts and retired people may be eligible for loans.
“We expect demand in the second charge market to grow significantly throughout this year and are refreshing our product offering,” he said.
“These changes may help borrowers who have been locked out by high street lenders.
“At a time when people’s circumstances may have changed due to coronavirus, we think it’s important that lenders offer flexible criteria and competitive rates to increase the choice available in the market.”
Meanwhile, Optimum Credit has today released a new suit of products called Optimum Plus.
Broker firm Loans Warehouse said the product range has been designed to target underserviced areas of the markets.
This included newly self-employed applicants, borrowers with complex and multiple income streams, benefits or variable income and would offer longer terms for older borrowers.
Second charge lending jumps by nearly a third in March – Loans Warehouse
This represented a £21.8m increase on February’s £69.6m.
Additionally, the number of completions rose by a quarter to 2,202 compared to 1,768 the previous month. This was the first time the number of second charge completions broke 2,000 since the pandemic began, according to the firm.
It added that March 2021 business was just 1.72 per cent below the figures posted in March 2020 – a £1.5m difference.
This rise in business volumes appeared to influence completion times as the average timescale from submission to completion was 12 days in March. This was one day slower than February.
However, Matt Tristam, founder of Loans Warehouse, said the case delay against the backdrop of a significant rise in activity showed “the industry [was] well-positioned for growth”.
He added: “Despite the monthly lending increasing by £21.8m, there was just a single day increase in completion time.”
The number of high loan to value (LTV) products returning to the mainstream sector also seemed to impact the second charge market, Tristam suggested.
Since January, lenders have provided first charge loans to those with smaller deposits by re-introducing more 90 and 95 per cent LTV deals on a permanent basis.
Overall, 49 per cent of loans were used for debt consolidation purposes while the second most preferred use was a combination of consolidation and home improvements.
Second charge loans for the sole purpose of home improvements alone accounted for 18 per cent of completions.
Brokers looking to second charge loans to help borrowers raise capital
Three of the top five most-searched second charge criteria terms featured “capital raising” during the month.
The most searched for term in the sector was “maximum loan to value (LTV)”.
However, capital was sought for purchasing buy-to-let (BTL) property, followed by home improvements, then debt consolidation.
In the residential segment, “furloughed workers,” topped the searches for the third month in a row, followed by “maximum age at end of term”.
“First-time landlord,” ranked first in BTL, then “lending to limited companies.”
Matthew Corker, operations director at Knowledge Bank (pictured), said the pattern of searches “demonstrate the economic divide in the UK at the moment.”
“Some have increased savings through lockdown and are using a larger deposit either to invest in property or add to their existing home. Others have been hit hard, losing their job or being put on furlough,” he said.
“Lenders continue to adapt criteria to keep up with the evolving market,” Corker added.
Second charge lending improves but remains far below pre-Covid levels – FLA
There were 1,609 arranged during the month compared with 2,435 in February 2020 – the last full month before the Covid-19 pandemic began.
In keeping with this, the value of business written was also down, totalling £67m during the month and representing a 37 per cent decline compared to the year before.
Somewhat encouragingly, this was higher than the £62m and £56m worth of deals completed in December and January respectively.
The slower than hoped for recovery can be seen with second charge completions down on all measures as the three months to February recorded 4,437 new agreements, a 33 per cent drop on the same period the year before.
The 12 months to February recorded a 46 per cent contraction in business volumes with 15,417 agreements completed.
Again, a slump was evident where the value of second charge business dropped 39 per cent to £185m in the three months to February and halved annually to £640m in the 12-month period before that.
Fiona Hoyle, director of consumer and mortgage finance and inclusion at the FLA, said: “The UK lockdown restrictions over the winter months contributed to a fall of a third in second charge mortgage new business volumes.
“As consumer confidence improves and the economy re-opens, we expect to see a strong rebound in demand in this market.”
Evolution sees rise in prime borrowers and value of debts consolidated
And while the value of loans taken out has increased, so has the value of debts being consolidated by both prime and pure debt consolidation borrowers.
The data from Evolution Money covers close to 700 loans completed by the firm from March 2020 to February 2021 and segregates between those borrowers using loans for debt consolidation purposes, and those clients who have prime credit ratings.
The lender added that between the two six-month periods it saw a more than 40 per cent increase in the volume of seconds completed and it anticipated further increases.
It found that in the last six months until the end of February 25 per cent of its second charge mortgages taken out were by prime borrowers, up from 19 per cent in the previous six months.
And by value this had risen to 37 per cent up from 31 per cent in the March to August 2020 period.
However, debt consolidation borrowers continue to be the main customers, accounting for 75 per cent of all cases by number and 63 per cent by value.
Perhaps most notably, the value of debts consolidated by both types of borrowers grew between the two periods – by £1,936 for debt consolidation borrowers up to £15,277 and by £645 for prime borrowers up to £26,012.
For those borrowers specifically using a second charge mortgage for debt consolidation purposes, the average loan amount was just over £20,500 with an average term of 131 months and an average LTV of 74.2 per cent.
And on average they consolidated five specific debts.
Over the last six months, Evolution data showed the most common uses were to: pay a loan provider (49 per cent); pay a bank (37 per cent); pay off retail credit (eight per cent); and pay off car finance (five per cent).
Borrowers also used their second-charge mortgage to pay county court judgements, debt collectors, first charge mortgages and utility providers.
For prime borrowers, the average loan amount is £35,700 with an average term of 166 months and an average LTV of 77.4 per cent.
Prime borrowers are typically taking out these second-charge mortgages again for debt consolidation (59 per cent), home improvement and some consolidation (29 per cent) and home improvement (nine per cent).
The average number of specific debts being consolidated by prime borrowers was six.
More home improvement
Steve Brilus, chief executive of Evolution Money, said the firm had seen a notable uptick in both the volume and the value of second charges being taken out by those customers with prime credit ratings.
And he noted that reasons for taking out second charges remained consistent, although there was a growing desire to use funding for home improvements alongside paying off other debts.
“The increase in prime borrowers shows there is a distinct and growing customer demographic who may well have a mortgage need but are unwilling or unable to remortgage their first charge product in order to secure their funds,” Brilus said.
“As you might expect, the average loan amount for prime borrowers is higher and their uses for the money more varied, although we are still seeing most customers taking the opportunity to consolidate and pay off debts, with many also using the cash to improve their existing properties.
“This data – which will be updated every quarter from now on – does show second-charges may have a much broader appeal, especially to those prime borrowers who are not willing to extricate themselves from a first-charge mortgage especially if it means paying a substantial early repayment charge in order to do so,” he added.
Rewind Wednesday – The Online Specialist Lending Event 2021: Second charge
Specialist Lending Solutions is exclusively releasing the video presentations from the event to watch at your leisure.
In this edition the presentations released focus on the second charge sector . They are:
Every second counts
Steve Walker, managing director, Promise Money
Steve Walker discusses how the second charge market is gaining traction, with increased and changing customer demand matched by lender innovation in regulated and buy-to-let offerings.
He addresses what has changed and how advisers can best seize the opportunities on offer.
Distributor panel discussion
This panel brings together representatives from advice firms to discuss where they see the specialist lending market going and how they and the sector as a whole are adapting to borrower needs.
Matthew Arena, managing director, Brilliant Solutions
Richard Bond, Crystal Specialist Finance
Matt Tristram, co-founder and director, Loans Warehouse
Chair: Victoria Hartley, group editor, Specialist Lending Solutions
The Online Specialist Lending Event 2021 is now accessible on demand for free to all mortgage and specialist lending brokers.
For more information visit:
Families increasingly using second charges to fund home deposits – Grundy
According to research by Legal & General and the Centre for Economics and Business Research (CEBR), 23 per cent of home purchases in 2020 had family assistance, up from 19 per cent in 2019.
With house prices continuing to rise, people’s hopes of becoming a homeowner are moving further away from their grasp.
The average deposit paid by a first-time buyer in 2020 rose 13 per cent to £57,278, up from £46,449 the year before, according to the Halifax.
So it is not surprising that the L&G research highlighted financial assistance was likely to increase with one in three people looking to buy in the next five years saying they will have to rely on family or friends.
If people are lucky enough to have parents who can afford to help them, all well and good but many are not in that situation.
Others are asset rich and cash poor and would like to help but don’t think they can.
One way to raise finance for a gifted deposit is to remortgage and take more money out of the property but that is not always possible.
The pandemic has made it more challenging for some borrowers to access high street mortgages and age could be a factor if approaching retirement. Remortgaging could also incur costs for borrowers including early repayment charges.
But there is another option. Homeowners who have a mortgage and can afford to make monthly repayments on another loan can take a second charge mortgage. This can be put towards a deposit for a family member to buy a home.
We are also seeing people who would rather give their children money now so they can set up home rather than leaving it to them years down the line as inheritance.
Reduce the LTV
At the end of last year we introduced criteria to support a second charge mortgage specifically aimed at the families supporting property deposits.
Intermediaries might not be aware that a second charge can be used for this purpose but increasingly people are using this type of finance to buy property.
Parents don’t have to provide the whole deposit, they could just contribute to it if their children already have some savings. This is a good way for home buyers to increase their deposit to bring down the loan to value (LTV) and secure a better rate.
Due to the nature of specialist lending, second charge mortgage lenders will underwrite each case manually and carry out an in-depth assessment of an individual or couple’s circumstances.
We always assess affordability and would not finance the loan if parents or grandparents were not in a position to repay it.
Second charge is a great way to help family members get onto the property ladder and finance can be made available quickly.
Know Your BDM: Matthew Scrafton, Evolution Money
What locations and how many advisers and broker firms do you cover in your role?
I currently look after 23 firms, however, I’m always looking to increase that number, and the areas I cover are generally quite broad, being right across the UK. Most of the brokers I deal with are in Wales however I also have contacts with advisers in Bournemouth, Norwich, Darlington, Scotland, and Northern Ireland.
How have you changed the way you establish and maintain a good relationship with brokers in the pandemic?
Like most people pre-2020 I had rarely used Zoom or Microsoft Teams, however, it’s now become a part of my everyday routine. Also, pre-2020 I rarely worked at home which I have found has pros and cons but overall, it’s been productive enabling me to give regular timely updates via e-mail or phone. A combination of working from home and in the office suits me best.
What personal skill is most valuable in doing your job?
It’s important to enjoy communicating and believe in the ‘product’ you sell. If you believe in the product and enjoy communicating, then they go hand in hand in my opinion. Having both attributes will make it easy to enjoy your work, speak with passion and keep people engaged in the product and naturally it will be something you look forward to doing.
What personal talent/skill would you most like to improve on?
Multi-tasking. I struggle to this day to tap my head and rub my belly in harmony.
Where would you rather be stuck, in bumper-to-bumper traffic or back-to-back Zoom calls?
That is a tough one as I do like to travel. In winter probably back-to-back Zoom calls with the radiator on, however in summer, I enjoy a bit of music in the car with some sunny summer vibes. As I am writing this though I am picturing beeping horns and a lot of stress on the road, so I will stick with the Zoom calls.
What is the best bit of career-related advice you have ever been given?
To enjoy what you do and ensure the advice you give people is the same advice you would give to your next of kin or a close family member. If you would give the same advice to them then you know it is the right thing to do.
What is the most unique property deal you have been involved in?
That is very difficult as I’ve also been underwriting for the last five years so there have been many, however it always fascinates me whenever we do deals which are based in London due to the house prices on certain types of properties always being beyond my expectations.
What has been your lockdown coping strategy?
For me I love to cook, and I love my food so to balance that I have been very motivated to stay fit. It began with the Joe Wicks PE classes last year, then to running three times a week and now I am signed up for the Manchester Marathon in October which is a good way to keep focused.
If you were head of the FCA for the day, what would you change about regulation in the mortgage industry?
It is difficult to say to be honest as I think Evolution Money work well within the regulatory rules and generally go beyond in terms of meeting the regulations, so nothing immediately stands out as an issue.
What was your motivation for choosing business development as a career?
I have always enjoyed travelling, meeting new people and as I mentioned earlier, I love to communicate whether it be with new or old friends. So, I have always felt this role would go hand in hand with what I enjoy the most therefore it brings out the best in me out.
If you could do any other job in the property sector, what would it be and why?
My wife is addicted to shows like Homes under the Hammer or Grand Designs, so naturally I watch these as well. Maybe one day I could present Grand Designs, or at least attempt an episode.
What did you want to be growing up?
Same as many young boys I am sure, at first it was a footballer. I was a cracking midfielder back in the day, gradually I moved to centre back and then eventually left back in the changing rooms. At that point I knew my dream was over. By about 14, I changed to wanting to be a DJ as I got my first set of turntables, then I realised I couldn’t mix so after that I thought long and hard and concluded a BDM role was best.
What’s your favourite face mask pattern to wear?
I’d love to give a flamboyant answer here, but I have only ever worn the white and blue ones. If I ever do splash out, I did once see the Manchester Buzzing Bee design so I would probably buy that.
And finally, what’s the strangest question you’ve ever been asked?
As a youngster I was often mistaken for actor Jamie Bell who was Billy Elliott in the film of the same name. Sometimes I even got asked to dance; fortunately, that did not stick with me forever.
Second charge recovery stalls further in January
According to data from the Finance and Leasing Association (FLA) 1,302 deals worth £56m were completed in the first month of the year – down from 1,526 deals worth £62m in December.
The figures, down 15 per cent for number of deals and 10 per cent by value, continued from the December falls of 18 per cent by deals and 17 per cent for value.
Before this, the market had seen a recovery growing month-on-month since May.
The results are particularly concerning as January is often seen as a busier month following on from a slower December.
Year-on-year the results were also disappointing with the £56m being down 46 per cent from the £104m worth of deals completed in January 2020, with a similar decline seen in case numbers.
Consumer confidence vital
However, it is possible the national lockdowns and hesitation over the stamp duty holiday deadline may have put some people off.
Indeed, reflecting on the figures, Fiona Hoyle, director of consumer and mortgage finance and inclusion at the FLA, said: “The fall in new business volumes in January is not surprising given the lockdown restrictions currently in place.
“We expect demand in this market to increase significantly during 2021 as consumer confidence improves.”
Brilliant Solutions and MCI add specialist support to panels
Brilliant Solutions has added Gatehouse bank to its panel to increase the range of buy-to-let deals brokers have access to.
Gatehouse Bank is a Shariah-compliant finance provider that serves UK residents, expats and international customers.
The bank offers two-year and five-year fixed rate products in the buy-to-let market for single residency investments and portfolios up to £5m, along with multi-unit freehold blocks and houses in multiple occupation.
Paul Stockwell, chief commercial officer at Gatehouse Bank, said: “We are seeing increased demand for our products from within and outside the Muslim community, and so we are delighted to be working with Brilliant Solutions to make our offering available to its club members.”
MCI Mortgage Club
MCI Mortgage Club has teamed up with Fluent Money to offer its members a secured loan referral service.
This is the first time the club has worked with the second charge market, and through the partnership, brokers will be able to access all second charge lenders in the market.
MCI members will be able to contact Fluent’s partner development team and marketing department and will have their own dedicated account manager.
Melanie Spencer, head of MCI Mortgage Club, said: “I personally believe there will be a greater demand for secured loans going forward, especially if people’s circumstances have changed because of the impact of Covid.
“A secured loan can often be a better option than remortgaging or taking a further advance on the first mortgage.”