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Second charges

Journalist: Anna Sagar, Mortgage Solutions / Specialist Lending Solutions

ended 11. January 2023

Looking to speak to mortgage brokers about second charge mortgages. 

  1. Do you expect them to grow in popularity this year and why?
  2. What is the lender landscape/product choice like? What would you like to see from lenders?
  3. What circumstances would you recommend a second charge and what should borrowers keep in mind?

4 responses from the Newspage community

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Samuel Mather-Holgate
Independent Financial Adviser at Mather and Murray Financial
Secured loans can be really useful for clients who have secured a variable fixed interest mortgage on their property with plenty of equity but have a specific need for capital expenditure and they don't want to refinance their whole loan at a higher rate. These are the types of lending enquiries we are seeing much more of as the base rate has increased so much in 2022. I also expect that 2023 will see more debt refinancing onto secured loans, where high street lenders have refused on criteria, policy or credit grounds.
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Justin Moy
Managing Director at EHF Mortgages
Second charge borrowing will be an excellent option for those who took advantage of long-term low mortgage rates, so we should see their popularity grow for the next 3 or 4 years at least. You can keep that low rate on the bulk of your mortgage, and only the new borrowing is on a higher interest rate, so the overall interest cost is still very attractive. Many will look to consolidate more expensive finance, such as credit cards that are typically over 20%pa, as well as home improvements. Second Charge Loan rates are normally 2% or 3% more than a traditional mortgage, and are not designed to run their full term necessarily. But they offer a way to avoid penalties and protect excellent mortgage rates in the short term. When that original deal expires, you can look to remortgage the whole amount at that time.
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Jonathan Burridge
Founding Adviser at We Are Money
The popularity of second charges amongst mortgage advisers will remain limited for as long as distribution remains restricted. The process of bringing about a second charge is no more complex than a first, it is just different and it is within the capability of most regulated advisers to complete if there was training and access available. Master brokers and packagers typically charge fees upwards of £995 (that's a minimum, maximums are generally capped at £5,000), lenders fees up to 2% (some of which is paid to the master broker/packager) and higher pricing to reflect the greater risk it quickly looks expensive when comparing to a further advance or remortgage. There is a place for second charge lending but it needs to be pulled into the mainstream intermediary market to make it fairer for the borrower.
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Gary Boakes
Director at Verve Financial
It's not yet mid-January and we have seen more interest in second charges than the whole of 2022. With the cost of living increasing people will be looking to look to refinance and debt consolidate this year to reduce outgoings. With lender criteria varying massively about paying off debt then second charges are going to an invaluable option for customers who don't fit mainstream lending criteria. The interest rates are inevitably going to be higher, but if it reduces your monthly outgoings and reduces your worries then this is only going to be positive for your financial wellbeing.