The second charge sector reached £1.02bn in 2017, the highest levels seen since the financial crash and a 9% growth over 2016. The market also experienced seven consecutive months of increased annualised lending, according to Enterprise Finance’s Second Charge Report.
Utilising data from the Finance and Leasing Association (FLA), Enterprise Finance found that the market “finally” broke the £1bn per year mark, with a particularly strong performance seen in the second and third quarter of 2017. Despite lower levels of lending in quarter four, with only £76m lent in December (still a higher figure than the £72m seen in December 2016) the sector overall had a successful year.
When comparing the market year-on-year, £1,024m was lent in 2017, a 9% increase over the £874m lent in 2016, whilst October and November saw the highest levels of growth at 13% and a further two months experienced double digit growth.
Enterprise Finance further reported that the second charge mortgage new business volumes increased dramatically throughout the year, with numbers being just over 19,000 in March 2017 and rising by 14.4% to almost 22,000 in December.
The firm has explained that this increase “reflects” the heightened level of engagement from brokers in the second charge lending market, as alignment with first charge mortgages, coupled with better-informed intermediaries and greater product diversity, combining to “fuel” interest.
Enterprise Finance managing director Harry Landy commented: “Despite a quieter 4th quarter in comparison to the middle part of the year, the second charge mortgage market has had a very positive 2017. Proliferation of products, attractive interest rates and fees that, for Enterprise at least, have reduced by an average of 40% have increased the potential of the sector.
“Moreover, several fundamental drivers – increasing levels of home improvement investment, greater needs to manage growing unsecured debt and the potential of the BTL market – give us good grounds to believe that the recovery of market expansion seen in 2017 will continue in 2018.
“Clearly, the most important factor in enabling that growth remains education of the key decision-maker in any deal: the broker. As growing broker understanding is bearing fruit, it’s important not to become complacent. We have to remember that education is a long and repetitive process, so there is a lot more work to be done to ensure that all brokers really know what second charges are, when they are appropriate and should be considered, and how to place them efficiently for clients.”
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