According to recent data provided by V Loans, home improvements was the reason cited for around one third of second charge loans, marking a move away from debt consolidation, which was previously the main reason given.
According to V Loans, as new customers enter the market, debt consolidation is no longer the main reason for a second charge loan. According to a study of the data between January and August this year, 33% of second charge loans were used for home improvements, compared with just 17% during the same months of 2014, in a study of 2,000 customers.
Debt consolidation was given as a reason for the loan in only 26% of the applications, compared to 75% of customers in 2014. The data also indicated that second charge loans were being used more frequently for mortgages and property purchases, with 13% using the loans for that purpose, in comparison with 2% in 2014. The average size of the loan has also increased, from £36,742 in 2014 to £67,301 in 2016.
Since the Mortgage Credit Directive was launched in March, the market has changed, with more brokers and customers being aware that a second charge loan can be used in place of re-mortgaging. According to the managing director of V Loans, Marie Grundy, there are many borrowers who could benefit from a second charge loan, including those who don’t want to lose their existing tracker or fixed rate deals.
To find out whether it is possible to benefit from a second charge loan, speak to a CeMAP qualified mortgage adviser.