Study reveals rising interest in debt consolidation
The UK’s second charge mortgage market has seen growth in new business volumes for the second consecutive month and experienced its first increase in new business value since June 2023, the Finance & Leasing Association (FLA) has reported.
However, over the twelve months leading up to January 2024, FLA figures have shown that new business volumes have dipped by 10% compared to the same period the previous year.
The data further revealed that 58% of new agreements in the second charge mortgage market were aimed at consolidating existing loans. Meanwhile, 12% were for home improvements, with an additional 22% combining both purposes.
“As always, customers who are concerned about meeting payments should speak to their lender as soon as possible to find a solution,” said Fiona Hoyle, director of consumer and mortgage finance and inclusion at the Finance & Leasing Association.
Meanwhile, Knowledge Bank, in collaboration with Pepper Money for the latter’s Specialist Lending Study, reported a 14% increase in searches for second charge mortgages year-on-year in 2023.
The most frequent search terms related to second charge mortgages were capital raising for debt consolidation, debt management plans, defaults over £300 or registered in the last three years, and credit repair for adverse credit.
“Second charge mortgages have been a talking point throughout the year,” said Nicola Firth (pictured), founder and chief executive of Knowledge Bank. “They provide a means for clients to reset their finances and get back in control.
“It is a route which requires specialist training to complete, but one which offers a more holistic approach to the advice journey for clients. You can see from the top five searches why second charges are such a hot topic, and the advice around these is key.”
Ryan McGrath, second charge sales director at Pepper Money, noted that with the ongoing cost-of-living crisis continuing to put a squeeze on household finances and more people turning to credit to cover day-to-day costs, brokers have an opportunity to improve awareness of second charge.
“It may not be right for everyone, but we think brokers will see even higher demand for second charge mortgages for debt consolidation in 2024 than they did in 2023,” McGrath said.
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