The second charge market continues to be one of the largest areas of untapped opportunity in mortgages, and the last year has demonstrated the need for greater education amongst both brokers and customers. 

The Finance & Leasing Association (FLA) has said that recent trends in the second charge mortgage market reflect its strong performance last year that has not been sustained during 2023, with business volumes falling by 13% in October. 

However, in the current environment, with so many customers opting for a Product Transfer over a remortgage, second charge mortgages provide an excellent way to release capital from their homes and allow brokers to offer their customers an alternative solution.  

So, what’s been holding the market back from fulfilling its full potential? 

According to the latest Pepper Money Specialist Lending Study, only 12% of all respondents say they would consider a second charge mortgage if they wanted additional borrowing secure on their home. However, when asked whether they would consider using a second charge mortgage to consolidate debts if it reduced their monthly credit bill, this number rises to 27%. 

 The FLA says 61% of new loans were for debt consolidation in October, with 12% being for home improvements, and a further 23% for both loan consolidation and home improvements. 

Our experience at Pepper Money is that debt consolidation and home improvements have continued to dominate the main uses for second charge lending throughout 2023 and we anticipate that demand for these will continue to grow into 2024. However, in recent months we have seen a significant increase in large loans.  Although the purpose remains heavily focused on debt consolidation and home improvements, we have also seen funds used for tax, family settlements, and even school fees. 

A second charge mortgage is often the most suitable solution for customers with a capital raising requirement – and even more so in an environment where rates have risen quickly and refinancing an entire mortgage balance onto a higher rate simply doesn’t make sense. If brokers are new to the market, partner with a master broker in the first instance. They can help you with applications as they’ve worked with lenders like Pepper for several years. 

With the cost-of-living crisis continuing to put pressure on household finances, more customers will likely consider renovations to their current home to meet their changing needs, rather than take on the cost of moving, which is often more than £10,000. At the same time, levels of unsecured debt continue to grow, with higher interest rates increasing the cost of servicing those debts. 

At Pepper Money, we’re active in working alongside our broker partners to ensure more customers recognise the benefits and understand the considerations of taking a second charge mortgage as a practical way to help them achieve their goals.  

With a view to making it even easier and quicker to complete a second charge mortgage, we’ve made improvements to our proposition throughout the year. For example, we have broadened criteria, reduced the information we need from brokers and customers, cut rates, switched to electronic payments and launched Offer with Consent to Follow. 

We’re not alone in enhancing our proposition, of course, and the second charge lending landscape is becoming even more competitive. Lenders have an appetite to lend and households across the country have a requirement to raise funds to help them achieve their goals. With this in mind, I firmly believe that 2024 is the year when brokers should realise the potential in the second charge mortgage market, and I’d encourage a conversation with a specialist distributor to start that journey.  

Ryan McGrath, Second Charge Sales Director at Pepper Money



Ryan McGrath,

Second Charge Sales Director
at Pepper Money