Second charge lending up 24%

Second charge lending up 24%

Second charge lending business was up 24 per cent in February, according to the latest figures from the Finance and Leasing Association.

The data, published on Friday (April 5), showed there were 2,163 new agreements made in the month at a value of £98m.

This meant new business was up 24 per cent from January to February and 9 per cent year on year in February.

For the three-month period leading up to February the year on year increase amounted to 19 per cent.

Fiona Hoyle, head of consumer and mortgage finance at Finance and Leasing Association, said: "In February, the second charge mortgage market reported its strongest rate of new business volumes growth since May 2017.

"The popularity of second charge mortgages continues to grow as people opt to improve, rather than move."

Taking out a second charge mortgage means those with a good deal on their first mortgage do not have to lose this deal by remortgaging their property to get the funds. Instead, they can use any equity they have in their property as security against the second loan, meaning the consumer will have two mortgages on their home.

Typically, second charge mortgages have higher interest rates than ordinary remortgages and will be more expensive, but for customers who have a base rate tracker mortgage with a low interest percentage, second charge mortgages could work out cheaper in the long run.

Ruth Whitehead, managing director of Ruth Whitehead Associates, said: "I think the reason more second charge mortgages have been taken out is because customers who may have taken out a mortgage before the financial crash could have a very good deal on their first mortgage.

"For customers who have a base rate tracker with around 0.5 per cent interest on top, it would most likely be cheaper for them to take out a second mortgage than to remortgage."