The second charge mortgage market is experiencing a significant resurgence, with new business volumes increasing by 36% in April 2024. This robust growth marks a notable recovery from the subdued performance observed throughout much of 2023, according to the latest figures released by the Finance & Leasing Association (FLA).
Growth Amidst Challenges
Despite the impressive growth in April, the twelve-month overview reveals a more nuanced picture. Over the past year, new business by both value and volume has remained 3% lower compared to the same period in 2023. This indicates that while the monthly figures show strong growth, the overall recovery in the second charge mortgage market is still stabilizing.
Purpose and Usage of Loans
The breakdown of new business by the purpose of the loan in April 2024 provides insights into consumer behavior and financial needs. The majority of new agreements, constituting 58.0%, were for the consolidation of existing loans, reflecting a continued demand for financial restructuring options among homeowners. Another 23.9% of new agreements combined home improvements with debt consolidation, while loans solely for home improvements accounted for 13.1% of new agreements. This distribution highlights a significant portion of borrowers leveraging second charge mortgages to manage their finances more effectively and invest in their properties.
Expert Commentary
Fiona Hoyle, Director of Consumer & Mortgage Finance and Inclusion at the Finance & Leasing Association, commented on the market’s performance, “The second charge mortgage market has seen new business grow in each month of 2024 so far after a subdued performance throughout much of 2023.” She emphasizes the importance of this financial tool in aiding homeowners to consolidate debt and fund home improvements amidst varying economic conditions.
Hoyle also advised, “As always, customers who are concerned about meeting payments should speak to their lender as soon as possible to find a solution.” This guidance underscores the FLA’s commitment to responsible lending and ensuring that borrowers have the necessary support to manage their loans effectively.
Market Outlook
The recent surge in second charge mortgage volumes suggests a growing recognition of these financial products as viable solutions for homeowners looking to manage existing debt or fund additional expenditures without refinancing their primary mortgage. The market’s performance in April could signal a broader recovery as economic conditions stabilize and consumer confidence returns.
However, the overall decline on a yearly basis also serves as a reminder of the challenges that remain in the broader economic landscape, affecting long-term market growth. Moving forward, the sector’s ability to sustain growth will likely depend on broader economic factors, including interest rates, housing market stability, and consumer financial health.
As the year progresses, industry observers and potential borrowers will be watching closely to see if this growth trend continues and whether the second charge mortgage market can maintain its momentum amidst fluctuating economic conditions.
