Analysing figures from the Bank of England and Finance & Leasing Association (FLA), Pepper Money found that this was faster than the 19% growth in the first-time buyer market, which had the second-largest growth over the period.
The market continued to surpass lending to first-time buyers last year, as the research found there was a 25% annual growth in the second charge mortgage market over the second half of last year, compared to 21% for first-time buyers. This was also larger than the 19% increase in lending to all homebuyers.
Pepper Money said growth was expected to continue this year, with the value of new business in January already 29% higher than last year.
In 2024, second charge lending totalled £1.7bn, up from £1.4bn in 2023. A total of £6.5bn has been lent in second charge mortgages in the last five years, a 27% increase on the prior five years.
Pepper Money wrote more than £500m in second charge loans last year, which was the best year for the specialist lender.
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Its data suggested that borrowers were using secured loans, or second charge mortgages, for debt consolidation, home renovations and to pay bills.
Potential for more second charge growth
Ryan McGrath, director of second charge mortgages at Pepper Money, said: “It remains a challenging lending environment, with the cost-of-living crisis continuing to act as a barrier to improving people’s financial positions and higher interest rates causing buyers to deeply consider their options out of fear of disturbing their existing, favourable, fixed-term deals. But the reality is people can’t put their lives on hold until interest rates fall, which has paved the way for secured loans to rise significantly in popularity, enabling homeowners to tap into the equity they’ve built up in their homes and use this to meet their current financial needs without disturbing their main mortgage.
“Recent FLA data shows that the second charge mortgage market grew by 29% in January compared to the previous year, and it’s expected that around 40,000 households will turn to homeowner loans in 2025. The market grew faster than the homebuyer lending market as a whole and remortgaging market too, to reach £1.7bn in 2024 and positioning itself well for more to come in 2025 to meet the clear demand from homeowners.”
He added: “In these challenging times, second charge mortgages have remained relatively insulated from the severest examples of financial turmoil, partly due to the flexibility they can provide homeowners needing to borrow over a longer period, such as lower interest rates compared to unsecured borrowing and the ability to spread costs to make repayments more manageable.
“With mortgage rates still high and inflation easing slower than hoped, anyone considering home renovations, buying another property, or consolidating debt should assess all their options – including second charge mortgages.”
