The sixth edition of Enterprise Finance’s Second Charge Report has found that the second charge market is showing sustained growth following seven consecutive months of increased annualised lending.
It reported that the market broke through the £1bn a year mark in 2017, with a decent fourth quarter that topped a resurgent year for second charge mortgage lending.
When comparing the market year-on-year, £1,024m was lent in the 12 months of 2017, compared with £874m in 2016. For 10 months in 2017, the annualised lending total grew versus the same month in 2016, with double digit growth in 4 months, including October and November +13%, with December’s calendar year figures up +9%.
Second charge mortgage new business has particularly increased in volume of transactions. Annualised numbers of cases advanced +14.4% from just over 19,000 in March 2017 to almost 22,000 by December. This reflects increasing engagement from brokers in the second charge lending market, as alignment with first charge mortgages, coupled with better-informed intermediaries and greater product diversity have combined to fuel interest.
October showed a strong start to the fourth quarter, with £85m lent in the month following a somewhat quiet end to Q3 with September’s £77m. November softened slightly, as a number of deals were withdrawn from the market while some reviews of lending underwriting standards took place, but nevertheless topped £80m. In December, lending was a quieter £76m but again exceeding the £72m of December 2016.
Enterprise said that overall, 2017 showed a return to form after 2016’s “disappointing” reaction to MCD and Brexit. The middle part of the year was particularly strong, with record breaking months in both Q2 and Q3. This gives a solid platform for growth in 2018.
Harry Landy (pictured), managing director of Enterprise Finance said: “Despite a quieter fourth 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 buy-to-let 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.
Enterprise continues our full commitment to building that expertise by working with our network partners as well as other agencies, to provide CPD-accredited training in this area for Appointed Representatives and Directly Authorised brokers alike. That’s good for the broker, good for us and ultimately good for the client as a result of better customer outcomes.”