The Intermediary – May 2025 - Flipbook - Page 20
S E C O N D C H A RG E
In focus
EVOLVING CUSTOMER
AND PRODUCT
he second charge
mortgage market has
evolved dramatically
in recent years. Once
considered a niche
lending solution, it is
increasingly becoming a mainstream
option for a growing number of
homeowners – and crucially, a more
diverse range of borrowers.
Traditionally, second charge
mortgages were favoured by
homeowners aged 40 and above
– typically with well-established
careers and significant equity in their
properties. These borrowers used
second charges primarily for home
improvements, debt consolidation,
or major one-off expenses like
funding school fees or buying a second
property. Today, that landscape is
changing – and fast.
T
A shifting demographic
The cost-of-living crisis, rising
property values, and a broader
cultural shi in financial aitudes
have combined to bring a new
generation of borrowers into the
second charge space.
According to the Finance & Leasing
Association (FLA), total second
charge lending over the last 12 months
reached nearly £1.784bn across
36,519 agreements.
In fact, March this year was the
second biggest month in second charge
lending since the Credit Crunch,
which evidences the buoyancy in
the market and lender appetite to
support customers.
Notably, around 68% of lending
was for debt consolidation, 24% for
home improvements, and 8% for
other purposes, including tax bills,
education, or starting a business.
The average loan size stands at
around £48,000 – up only slightly
from previous years – suggesting
that while borrower demographics
are changing, responsible lending
18
The Intermediary | May 2025
remains a priority. Around 50% of
loans remain under 70% loan-tovalue (LTV), with only around 26%
exceeding 80% LTV, indicating a
continued emphasis on sensible,
equity-based lending decisions.
Drivers of change
So, what’s behind the surge in younger
and more varied applicants?
1. Increased financial awareness
Millennials and Gen Z are showing a
greater awareness of financial tools
and products. Armed with knowledge
from digital platforms, they’re seeking
out flexible, cost-effective borrowing
solutions – and second charges
increasingly fit the bill.
2. Changing attitudes
towards debt
There has been a cultural shi in
how younger generations view debt.
It’s no longer simply a burden; it’s a
strategic tool. With second charge
products oen offering lower rates
than unsecured credit, many are using
them to consolidate debt efficiently
and take control of their finances.
3. Greater diversity in
homeownership
The profile of the UK homeowner is
no longer uniform. More culturally
and socioeconomically diverse
than ever, today’s borrowers expect
tailored, flexible lending solutions.
Second charge products, with
their adaptability and evolving
underwriting criteria, are beginning
to reflect this demand.
4. Economic pressures and
lifestyle goals
The cost-of-living crisis, stagnant
wage growth, and rising interest rates
CAROLINE MIRAKIAN
is sales and marketing
director – mortgages
at United Trust Bank
have driven homeowners to seek
alternative forms of finance. Whether
it’s to fund energy-efficient upgrades,
cover unexpected expenses, or start a
business, second charges are offering a
quick and flexible finance option.
Set for growth
While it would be premature to
suggest we’re heading back to the peak
lending volumes of 2008, the signs
are encouraging. The second charge
market has shown steady growth
over the past couple of years, and this
upward trend looks set to continue –
particularly as younger homeowners
become more comfortable with using
home equity to reach their goals.
Looking ahead, several factors
could continue to support market
expansion:
Increased homeownership among
younger adults, offering a broader
base for second charge lending.
Growing demand for financial
flexibility, especially as consumers
seek alternatives to unsecured debt.
Rising property values, giving
homeowners more equity to
tap into.
More progressive aitudes toward
borrowing, especially for personal
investment purposes like education
or entrepreneurship.
