This segment has seen 10x more lending compared to BTL lending
New research from specialist lender Pepper Money has revealed that second charge mortgages are leading the way in the UK mortgage market, growing faster than any other segment over the past five years.
Often referred to as homeowner loans, second charge mortgages allow borrowers to access the equity in their homes without affecting their primary mortgage.
According to the research, second charge mortgage lending grew by 17% year-on-year in the first half of 2024, significantly outpacing other segments. This growth stands in contrast to the declining activity seen in most areas of the mortgage market. Notably, first-time buyer lending grew by 13%, while further advances recorded only a 5% increase. In comparison, buy-to-let (BTL) lending to individuals saw just £76 million in loans during the same period, while second charge mortgages accessed £804 million.
Since the onset of the pandemic, homeowners have tapped into £3.2 billion via second charge mortgages, marking a 27% increase compared to pre-pandemic levels. The trend has been consistent across the past two and five years, with second charge lending increasing at nearly twice the rate of any other segment since 2019. These loans have become particularly popular for funding home improvements, debt consolidation, paying tax bills, and even covering deposits for BTL properties.
Second charge mortgages gain traction
Pepper Money’s analysis also shows that second charge mortgages are the only product to have grown in popularity since the disruptive 2022 mini-budget, which saw a sharp rise in interest rates and shook confidence in the housing market.
Ryan McGrath (pictured) director of second charge mortgages at Pepper Money, sees this as a sign that second charge mortgages are coming into their own, shedding their reputation as a niche financial product. “There are too many people who only think of personal loans or credit cards who might benefit from carefully considering whether a homeowner loan could be a better fit for their needs,” he said. “Bricks and mortar are an untapped resource when it comes to helping UK households pursue their financial ambitions.”
Pepper Money’s findings are based on data from the Bank of England and the Finance & Leasing Association, alongside its own analysis of lending activity to over 7,500 applicants.
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