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.
TSB adds green further advances to range
Existing residential and buy to let customers can borrow a minimum of £10,000 up to 85 per cent loan to value (LTV). The money can be used to fund renovations such as loft and wall insulation, solar panel installation and heating upgrades.
A minimum of £1,000 must be spent on green improvements.
If all of the money is used to fund emission reducing improvements, customers will be offered a rate reduction of 0.5 per cent with no product fee. Where the borrowing funds a mixture of ecological and standard improvements, then just the part of the loan used for environmentally friendly changes will benefit from the reduced rate.
Nick Smith, head of mortgages at TSB, said: “We are all conscious of the need to do more to protect the environment and we know that a lot of our customers are also keen to play their part in tackling climate change.
“So we’ve decided to give our mortgage customers a helping hand, by offering them a discount when they borrow to invest in the energy efficiency of their homes.”
‘There is pent up demand for secured loans out there’ – Grundy
Marie Grundy, MD second charges at West One Loans speaks to Mortgage Solutions group editor Victoria Hartley about the way lenders adjusted their credit risk appetite during the pandemic, allowing the market to rise to £90m in March, a 31 per cent month-on-month increase on February.
“What we’ve seen is quite a lot of pent up demand from borrowers since the pandemic. Some of the more popular reasons include home improvements, with more and more people working from home and wanting to make changes to their lifestyles.”
For more on how the pandemic has changed the second charge market, watch the second in this series of one-to-ones with West One Loans below.
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.
More borrowers using equity release to buy homes – Canada Life
Based on the firm’s customer data from 2020, 16 per cent of equity release borrowers used the released funds to buy a new home in Q3, rising to 18 per cent in Q4.
This was compared to just six per cent and eight per cent of people using equity release for this purpose in Q1 and Q2 respectively.
Otherwise, using the product to cover essential costs was the most popular use of the money.
Some 45 per cent used their released funds to pay off the mortgage, a quarter consolidated existing debts and 18 per cent used the money for day-to-day purchases.
Funding home improvements was the most favoured use of equity release, with two fifths of Canada Life borrowers using the money for this purpose.
Alice Watson, head of marketing, insurance at Canada Life, said: “Looking at the reasons why people have chosen to use their property wealth can provide an interesting snapshot into the spending priorities of the nation during the pandemic.
“For example, the boom in new property purchases is likely to have been fuelled by the stamp duty holiday announced in the summer Budget.”
“It is largely unsurprising, that 2020 a year dominated by lockdowns and restrictions has seen a drop in people using equity release to go on holiday. While this decline is expected it will be interesting to see whether the rollout of the coronavirus vaccines will lead to the beginning of a resurgence in travel.
“The popularity of home improvements is also particularly fitting for the year that many of us stayed home, within our own four walls,” she added.
Less than £100m of ‘woeful’ Green Homes Grant spent as budget slashed
The grant was launched in September 2020, with the intention of providing homeowners with vouchers which can be used for home improvement works which would improve the energy efficiency of their property.
In a written answer in Parliament this week, the government confirmed that it had so far received just shy of 72,000 applications for the voucher scheme, with vouchers worth a paltry £94.1m having been handed out.
Conservative MP Philip Dunn, who chairs the Environmental Audit Committee of MPs, told the BBC that while the scheme was a good idea in principle, the way it had been handled was “woeful”.
He has previously criticised how difficult it is for builders and installers to gain accreditation for the scheme, leaving them in limbo and called for the application process to be streamlined.
Last week it emerged that the funding for the scheme is to be dramatically slashed from April.
The government has now confirmed that the original funding for the scheme ‒ £1.5bn set aside for households and £500m for local authority led schemes ‒ only applies to this financial year, with any unspent funds being claimed back by the government.
The Department for Business (BEIS), which runs the Green Homes Grant scheme, has confirmed that for 2021/22 just £320m has been set aside for the scheme.
How the Green Homes Grant was supposed to work
Homeowners can apply for vouchers worth up to £5,000 to carry out work on their home which will improve its energy efficiency.
This was inevitably more complex than it sounds, as homeowners have to include at least one ‘primary’ improvement in that work.
That covers insulation ‒ whether that’s cavity wall, underfloor or roof insulation ‒ or low carbon heating, which could include the likes of hybrid heat pumps or solar powered heating.
They can then get vouchers for the same amount spent on the primary improvements for ‘secondary’ improvement work, which covers things like draughtproofing, double glazing and energy efficient doors.
Crucially the primary work has to be completed before starting the secondary work.
Newbury BS launches green advance mortgage
The green mortgage product rewards existing borrowers who want to take additional borrowing to fund home improvements with a lower interest rate.
To be eligible, borrowers must intend to use at least half of the funds for one or more environmentally friendly home improvements.
The GoGreen further advance product options include a five-year discount at 1.49 per cent which is from 0-60 per cent loan to value (LTV) and another five-year discount at 1.59 per cent, from 0-75 per cent LTV.
The minimum and maximum loan amounts are from £2,500 to £39,999.
This product was developed in response to the chancellor’s announcement of a £5,000 grant to homeowners looking to make greener renovations to their homes.
Karen Smith, sales manager at Newbury Building Society, said: “More of us are becoming increasingly aware of our impact on the environment and are seeking ways to reduce our carbon footprint.
“One way of doing this is to encourage homeowners to make energy efficient changes to pre-existing homes, not just new-build investments.”
She added: “Our GoGreen further advance incentivises existing borrowers to improve their energy performance certificate to help combat climate change.”
Nationwide launches green further advances and tweaks rates
The mutual is also increasing rates on high loan to value (LTV) deals and trimming them on products with a high deposit.
Nationwide said at least half the cash taken from its green additional borrowing product must be used to fund a range of sustainable enhancements, such as solar panels, boiler upgrades, insulation or electric vehicle charging stations.
The loans are only available to existing mortgage members and come with reductions of up to 0.69 per cent on existing no fee, two- and five-year fixed further advance rates.
As a result, rates will start from one per cent, with no product fee and can be used for borrowing between £5,000 and £25,000, up to a maximum of 90 per cent LTV.
There are no limits on which suppliers borrowers can use, but the products are only available directly from Nationwide.
High LTV rates higher
Nationwide is also increasing its two-year fixed rates at 95 per cent LTV for house purchase and first-time buyers by up to 0.15 per cent.
The deal with a £999 fee is increasing by 0.15 per cent to 3.09 per cent, while its fee-free version is rising by 0.05 per cent to 3.19 per cent.
Meanwhile, rates for three- and five-year remortgage products available up to 60 per cent LTV are reducing by 0.10 per cent to 1.44 per cent with a £999 fee, while fee-free deals will be reduced 0.05 per cent to 1.69 per cent.
For switchers and further advances, rates for two-, three- and five-year products available up to 60 per cent LTV are reducing by up to 0.15 per cent.
Nationwide director of mortgages Henry Jordan (pictured) noted there was an urgent need to reduce carbon emissions from homes and that meaningful incentives were the only realistic way to help people make their homes more sustainable.
“This new loan is the first product we are launching as part of our wider commitment to make £1bn available to kickstart green home improvements,” he said.
“With more than 1.5 million homes on our mortgage balance sheet, we believe offering this new loan can make a real difference as we play our part in helping to tackle the climate crisis and help members to do the same.”
Fixing-up homes shapes equity release market – Canada Life
The number of customers who used equity release for home improvements slightly rose in Q4 2018 to 47 per cent compared to 46 per cent in the same quarter in 2017.
Of the 47 per cent of customers who used equity release to improve their home or garden in Q4 2018, over a third used it for improvements adding value or extra enjoyment, such as extensions or conservatories.
The remaining 10 per cent used equity release for accessibility improvements that made their homes safer or more comfortable, such as stairlifts or wheelchair ramps.
The second most popular use of equity release in 2018 was to clear existing mortgages, standing at 38 per cent. The biggest year-on-year shift was in the number of people unlocking the value of their home to clear a residual mortgage in Q4 2018 at 44 per cent, up almost 10 per cent on Q4 2017, at 35 per cent.
More than one in four people used equity release to manage unsecured debts in 2018. Last year’s final quarter figure for unsecured debt was also the same as 2018 as a whole, rising slightly from 25 per cent in Q3 2018.
Other popular uses for equity release among UK households in 2018 were holidays at 22 per cent, day-to-day living at 21 per cent and gifting to family at 16 per cent.
Home alterations highest since 2015
Alice Watson, head of marketing and communications at Canada Life Home Finance (pictured), said: “It is significant how many people are untapping the value of their property to fix-up their home, or increase their comfort and security as they grow older.
“This significance is even clearer when seen in the context of the latest data from the ONS, which shows the amount spent by 50-74 year olds on alterations to their house is at its highest level since at least 2015.
“Taking out equity release to fund home and garden improvements benefits more than just the current occupiers. Such enhancements can add value to the property and help pass on wealth to future generations.”
Watson added that these figures also show the significant number of retirees that are taking out equity release to consolidate existing debt.
She said: “Alongside the number of customers gifting to their family and using equity release to make improvements to their home or garden, these are signs that more people are aware of the inter-generational benefits of equity release.
“As the Equity Release Council figures last week showed, the equity release market is going from strength to strength. We fully expect the market to keep growing and customers to continue to diversify their reasons for using equity release.”
Home-improvers provide broker opportunities for the foreseeable future – Calder
It allows us to keep on top of current market activity, review past performance and assess what individual customers, intermediary partners and strategic alliances might be looking for in the future.
Much of the information we gather remains for internal use only but collating important statistics from a variety of sources also helps us to inform, educate and raise awareness on a wider scale.
And issuing selected data to relevant media outlets also helps with our marketing, PR and branding – with relevant being an important word within this sentence.
Regular home updates
One of the main take-outs from our 2018 Barclays Home Improvement Report being that the average Briton now stays in their property for 19 years before moving, and regularly updates their home in this time.
It also included the UK’s top 10 list of worst DIY home improvements, which helped generate interest across a different set of media and social media outlets.
So, what can intermediaries glean from such data which may, on the surface at least, not directly affect their business?
For market specialists the devil is usually in the detail.
Included within the data were some regional breakdowns.
For example, it showed those in Wales are the least likely to move property regularly, with the average homeowner staying put for nearly 23 years.
However, those in Scotland are the quickest movers, upping sticks after an average of almost 15 years.
It also found that social media is influencing more people, especially when it comes to updating their property and particularly in the younger age groups.
Four in ten 23-34-year olds surveyed stated that they had been inspired to improve their home from what they have seen on social media. While 15% admitted to improving a room specifically to post on their social channels.
But what does this really mean for you?
Homeowners need funds to improve their home
No matter what the motivation, the report emphasised just how many committed homeowners are doing up their homes.
In fact, a huge 79% of homeowners have made home improvements over the past two years, and 73% want to make improvements in the next 12 months.
With so many homeowners looking to take on home improvement projects, the question is – how are they going to raise the necessary funds to do so?
This further highlights the ongoing need for good, professional holistic advice when it comes to any potential remortgage or second charge needs.
And how these markets will continue to provide opportunities for the foreseeable future within the intermediary marketplace.
Being aware of regional demographics and behavioural changes can also help establish a stronger profile of your existing clients as well as potential new ones.
As the influence of social media grows, think about how useful it could also prove when attracting, educating and updating a variety of people on their mortgage needs and financial wellbeing – Financial Conduct Authority financial promotions regulations permitting of course.
Reading beyond the headlines and digging a little deeper to extract the right information is something which mortgage intermediaries are well-versed at.
While you certainly won’t have time to read all types of research papers, reports or indexes in depth, they can prove useful in better understanding your client’s requirements, and help you reach out to those who need your advice the most.