New research has indicated that remortgage or further advance customers could benefit from taking out a second charge loan.
V Loans estimates that this could be the case for nearly 10% of consumers.
The secured-lending specialist believes a mix of record law interest rates in the second charge market, coupled with the strong growth of the sector from 2011 gives an indication of the benefits for customers, alongside opportunities for brokers.
In addition, landlords could also be set to benefit from further competition in the buy-to-let second charge market, which could lead to significant price reductions. What’s more, this could make second charge lending a more attractive alternative to remortgaging, which could allow landlords to benefit from the heightened equity within their current portfolio.
On course to hit £750m in lending this year, the second charge market has seen year-on-year growth since 2011. Rates have fallen to record low of 4.05% above base rates, making the case for lenders to take out a second charge, while not causing any detriment to their withstanding mortgage arrangements.
With this said, V Loans predicts that only 50% of advisors promote second charges to their clients and as such is urging advisors to think of the benefits of these loans.
Landlords to benefit from second charge market?
‘Remortgaging or taking a further advance is not always in the client’s best interest and therefore it’s essential that all options are considered,’ said Marie Grundy, Managing Director of V Loans. ‘Interest-only customers, those benefiting from lifetime trackers and low fixed rate deals or those who do not want to incur substantial early repayment charges by remortgaging, including landlords who wish to release trapped equity, could all stand to benefit from second charge finance.’
‘The pending alignment of regulation for first and second charge markets will deliver huge opportunities and innovation to the market allowing advisers to provide better customer outcomes. Intermediaries should seriously consider including second charges within their scope of service ahead of the regulatory changes next year,’ Grundy added.