Second charge lending in December comes to £118m – Loans Warehouse

Second charge lending in December comes to £118m – Loans Warehouse

 

According to Loans Warehouse latest secured loan index, this continues a trend of growth in the market with total second charge lending in 2021 pegged at £1.18bn from over 27,000 loans.

It was hinted in December that lending had passed the £1bn mark for the time since 2019 and should be seen as a “benchmark of success” for the market, according to Loans Warehouse’s managing director Matt Tristram.

The report added that Q4 2021 had the highest lending for the quarter on record since 2008.

December’s lending was down £18.6m compared to the prior month, however, the report said the figures showed a “continuation of a boom in second charge lending” that had not been seen since before the credit crunch.

It added that one lender reported record completion figures, which the report said was a “rare event for the festive period”.

Around 84 per cent of loans were below 85 per cent loan to value (LTV). The report attributed this to the fact that the pandemic impacted the level of equity available to borrowers, so second charge lending was an alternative method for raising capital.

Completions in December came to 2,500, which was 18 per cent down on November figures.

However, the average loan size rose to £47,934, which was up from November’s record breaking £45,399.

The report added that 40 per cent of the loans in December were for consolidation and home improvements, 37 per cent were solely for consolidation and 17 per cent of loans were for home improvements.

Average completion times, from submission to completion, were 23 days, which was 0.4 days slower than November.

The average term was 16.4 years.

This report collates information from Optimum Credit, Oplo, United Trust Bank, Together Money, Masthaven, Norton Home Loans, Equifinance, Evolution Money, Spring Finance and Selina Finance.

Second charge lending on track to hit £1bn this year – Loans Warehouse

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.

Lenders are responding to increased demand for second charges – Simpson

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.

Second charge lending pegged at £95.6m in August

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

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

‘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

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

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

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.

 

Slashed budgets

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

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.”