house prices

15 Mar 2019

Borrowers turn to second charge loans in light of Brexit

As the UK continues facing economic uncertainty, with Brexit causing chaos, it has been claimed that people have been forced to turn to second charge mortgages.

Thistle Finance, specialist packager, remarked that they have seen a 12% year-on-year increase in the fourth quarter of 2018 in second charge mortgage activity.

They also noted around 25% of total loans that were arranged were partly or fully used to help people cover their self-assessment tax bills, which were payable before the 31 January 2019 deadline.

Managing director of Thistle Finance, Mark Dyason, said: 

“It’s common knowledge that the seconds market is thriving and the fact that people don’t want to jeopardise extremely low mortgage rates is certainly a key driver in this.

“What stood out in the fourth quarter, however, is how a far larger number of people than usual were using second charges to pay off their tax bills.

“You can only speculate as to why, but it could be that a protracted period of high inflation has had an impact or Brexit uncertainty has reduced income or work flow.”

The Finance and Leasing Association (FLA) released a report last month, in which their figures revealed that the second charge market grew in December 2018, for the sixth month in a row.

According to them, new agreements increased by 13%, from 1,584 in December 2017, to 1,792 (£80m) in December 2018.

Total number of new agreements for 2018 stood at 23,529, which was 7% higher than the total for 2017, with a value of just over £1 billion.

The FLA said it expects the market to see further single-digit new business growth in 2019.

Mortgage technical manager at John Charcol, Nicholas Morrey, commented:

“Brexit has certainly caused uncertainly. As a result, fewer people are moving property and instead are looking to do home improvements.

“However, some may be reluctant to get funding from their original mortgage lender so instead are looking to second charge loans, explaining the possible increase in this sector.”

By Lyba Nasir