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second charge versus remortgage

Journalist: Lana Clements, The Sun

ended 06. July 2022

Hello,

I'm looking at second charge figures - the sector is booming - so just looking to gain a little more insight into what's happening for Mortgage Soulutions. 

Are more borrowers opting for second charge over remortgage? is that a good thing? pros and cons of the two and any other thoughts relating to these areas appreciated

thanks 

Lana  

3 responses from the Newspage community

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Imran Hussain
Director at Harmony Financial Services
With mortgage rates rising faster than a wink of an eye, second charges have to be considered for every client who is tied into a fixed-rate mortgage currently for the foreseeable future should they look to raise capital for home improvements or debt consolidation as for a client on a sub 2% fixed rate for the next few years will be paying considerably more should they remortgage the whole mortgage and raise capital compared to just raising the amount they need via a second charge for home improvements or whatever they wish to use the money on advice has to be based on the clients individual circumstances rather than a blanket approach, I see second changes being more popular over the next 18 months whilst rates are rising, for borrowers looking to raise capital.
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Scott Taylor-Barr
Principal Adviser at Barnsdale Financial Management
In the current interest rate environment, it makes sense that second charge loans are seeing an uptick in use; if a client has £250000 on 1.24% fixed rate deal with 3 years left to run on it, but wants to borrow an extra £30000 for home improvements, then remortgaging them away to a 3.24% deal (and paying an ERC to the current lender to boot) would be madness - a further advance with the existing lender, or a second charge loan is going to be a much lower cost solution for the client in most scenarios. The total debt can then be reviewed at the end of the 1.24% fixed rate, in our example.
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Robert Payne
Director at Langley House Mortgages
We have seen a notable increase in second charge enquiries, as borrowers want to hold on to their existing rate for as long as they can and may not have the capacity to do additional borrowing with their current lender, which makes second charge options attractive. This could be a sign of the financial squeeze people are experiencing as a lot of the second charge enquiries we are getting are related to debt consolidation to reduce monthly outgoings. This short term solution could become a big problem if borrowers are not factoring in future remortgage plans as they could be restricting their options if the total secured debt is not considered affordable.