Second charge lending rates reducing

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 Lenders have seen the potential growth in the second charge lending market and have responded well by offering very competitive short and long-term packages to suit the majority of needs.

Over the last 12 months second charge interest rates have tumbled and are now very much in-line with a standard mortgage. With the Bank of England holding interest rates again it is expected the already low rates for second charge lending will fall again.

Second charge lending is growing in stature all the time and is now a very serious alterative to the once traditional re-mortgage. In the past a second charge loan was seen as a very expensive alternative to more traditional methods of raising capital.

Another major advantage of second charge lending is the speed of completion. A standard re-mortgage can take months to complete were as a second charge loan can be completed in 15 working days. This of course does depend on the complexity of the case submitted.

This form of loan will not suit everybody but it is without doubt worth exploring with the help of a qualified independent adviser. These days the choices of loans open to the majority of homeowners are vast and it is vital to get the correct one to suit your needs. Making the wrong choice could prove to be very expensive over the longer term so do seek the appropriate professional advice.

Choosing a loan

This is no easy task as there are so many different options open to the majority of applicants. Be sure you know how much you feel comfortable in repaying each month and seek professional independent advice as to the best loan to suit your needs. We have fully qualified advisers waiting who can assist you so please do get in contact.

 

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Average loan size increases

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According to figures from the Finance and Leasing Association (FLA), the average second charge loan size has increased from around £25k ten years ago to around £45k now.

The loan-to-value of around 60-65% on a second charge loan hasn’t changed much over the last ten years though, so it is higher property values which have enabled the loan size increase.

Average repayment terms requested at the outset are around 15 years, although the majority redeem within about four to five; and two thirds request a fixed rate product giving them surety of their repayments for the fixed period – important when Base Rate is expected to rise further in that period. Even with a fixed rate, having no early repayment charges means the borrower can refinance whenever circumstances suit, without penalty.

Re-mortgage or a second charge?

Why would one opt to take the second charge route rather than re-mortgage?

Lots of reasons actually. For example, many customers have a really good first mortgage deal, maybe a great fixed or tracker rate that they don’t want to give up. Taking a second charge at a higher rate may mean that the blended rate across the whole debt is still lower than a new first deal, so a second charge loan can make good financial sense.

Some borrowers may face a stiff early repayment charge on their first mortgage if they re-mortgage. Others may have had a change in their circumstances which means switching to a bigger first charge mortgage is not an option. Perhaps they started a family or changed jobs resulting in a different source of income. Let’s not forget, second charges can be considerably quicker to complete than re-mortgages, especially with the expanded use of Automated Valuation Models.

Way forward

Second charge loans do not suit every need and it’s vitally important any potential borrower seeks professional independent advice from a qualified adviser. If you would like to discuss a potential loan please do contact one of our fully qualified advisers.