The second charge mortgage industry has returned to pre-covid levels of lending, HBD Online is told.
Whilst many brokers and lenders faced uncertainty and slow periods during the covid pandemic, the market has bounced back and recent lending reports show that volumes and approvals are consistent with those pre-covid.
Second charge mortgages, otherwise known as secured loans, leverage the value of a person’s property to borrow money. The individual can borrow depending on how much equity they have tied up in their home, with loans always secured against the property and at potential risk of repossession if repayments are not made on time.
David Beard, founder of secured lending broker Lending Expert, commented: “Secured loans and homeowner loans are back to funding at regular levels, which is really great to see. This time last year, a lot of lenders had paused altogether due to the pandemic and things were looking bleak.”
“But the appetite of lenders is still very much there and funding remains high for things like second charge mortgages and other loans secured against your home. This has been largely driven by the extended stamp duty holiday and the desire of UK homeowners to renovate and maximise their living space during the rest of the pandemic.”
When the covid-19 pandemic hit around 12 months ago, a lot of secured and personal lenders ceased lending. The reason was largely because affordability and income became uncertain for many applicants, especially with parties unsure on how long furlough might be extended to and whether individuals would remain employed thereafter. Equally, a lot of construction was put on hold due to lockdown measures and this created further delays for surveyors, solicitors, planning permission approval and more.
The stamp duty holiday has contributed significantly to the continued growth of the second mortgage industry, with 0% stamp duty on properties under £500,000 and whilst this originally was planned to end on 31st March 2021, this was further extended by the Chancellor until 30 June 2021.
“Second mortgages are mostly used for home renovations and large purchases such as weddings,” continues Beard.
“But in these times, people are looking for ways to maximise the quality of life at home. Although you cannot borrow as much with a second mortgage as you can with a first, some customers are using this to create new home offices, home gyms, spare bedrooms or help their children get on the property ladder, whilst taking advantage of the lower stamp duty rates.”