Commercial mortgage market update

Uswitch published data earlier this year, describing 63% of mortgages advanced this time last year (Q4 22) being done so with an LTV of 75% or less. This essentially means that a majority of consumers with mortgages have plenty of legroom for a second-charge loan to bail them out of a crisis situation. For these borrowers, releasing a portion of this equity would enable them to pay down any existing debt they have, taking advantage of the lower rates that borrowing against a property attracts.

A better understanding of second-charge mortgages could potentially lead to a significant upswing in sluggish lending volumes through 2023. While some advisers continue to be hesitant in recommending second-charge products (fueled by various misconceptions about these products), there has been substantial progress in the second-charge market and there still exists untapped potential for further integration with the first-charge market.

Debt consolidation and the need to lower the monthly payments on high interest credit cards, overdrafts and personal loans is a consistent theme for the industry. With stricter affordability and criteria rules being imposed by 1st charge mortgage lenders, we are seeing more demand for seconds from more mainstream, high-street customers. Good credit scores, good income, and with higher levels of personal borrowing on higher rates.

We are also seeing a small shift from the general 80/20 rule (80% direct / 20% via intermediary) for second charges. With the intermediary starting to gradually increase its market share in this arena.

The second charge market may not have grown in 2023. It is however certainly going to grow in 2024. With several new, well-funded lenders entering the market, increasing cost and levels of unsecured debt and an industry reinventing itself in terms of the value it provides. The outlook for Dec and into 2024 is looking strong for the second charge market.

We love 2nd-charge mortgage solutions at Castle View Finance Ltd for regulated and non-regulated clients. It helps wrap up unsightly debt, drives clients' ambitions for needs and supports cost of living management in the right circumstances. However, the dark side in our experience is the excessive charges a lot of brokers and packages leverage, usually when there is a genuine need for the client.

We always assess affordability before advice. There are a lot of great products in this space, clients can utilise this until a remo is due, protecting historic lending rates on the 1st charge and then wrapping the remortgaging in one consolidation, without this being treated the same as debt con - although we expect to answer any lender inquiries the same.

This can take a burden away from a client giving them breathing space or allowing them to consider other uses (for our investment clients) which is usually cheaper than short-term lending and a controlled affordability.