Second charge mortgages are a popular and versatile solution for borrowers looking to release equity from their home without remortgaging their existing loan.
For many of these borrowers, safeguarding the preferential rate on their first charge mortgage is a key consideration, but it is the speed at which the funds can be released that is undoubtedly one of the product’s greatest features.
Many borrowers turn to second charge mortgages because they need to access funds quickly. This could be for a number of reasons, such as paying off or consolidating debt, financing time-sensitive projects or renovations, or taking advantage of an investment opportunity.
There are also situations where a second charge mortgage can prove attractive because they provide an option for borrowers who may not qualify for a remortgage due to changes in their credit profile or other financial circumstances.
Some of these borrowers may have debts to consolidate or pay off and can therefore capitalise on the wealth accumulated in their existing property by taking out a second charge to release funds.
They can then use the money to repay any outstanding debts while also avoiding any early repayment charges (ERCs) for leaving their existing loan before the end of the term.
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Debt consolidation biggest driver of demand
Being able to secure funding quickly can make a significant difference in situations where the client must move quickly, particularly when it comes to paying off debt. In fact, debt consolidation remains the biggest driver of second charge loan growth in the UK, with 59% of loans agreed in the first half of 2024 taken out for this reason, according to the Finance & Leasing Association.
In addition, 23% were secured to cover the cost of home improvements and the consolidation of existing loans combined, which clearly illustrates that demand for the product is at an all-time high.
This presents brokers with an ideal opportunity to tap into this lucrative and growing area of the mortgage market by offering their clients fast, reliable second charge mortgage products to address their needs.
Given the economic challenges many people have faced over the last few years, there is a specific segment of the mortgage market that may now be looking to get back on track as the economy starts to settle down.
