Second charge mortgages get a boost prior to new regulations


Second charge lending has increased by two-fifths over the last quarter, according to the Finance and Leasing Association.

In the three months to the end of February, lending in this area surged, compared to the year before.

Product technical manager at broker John Charcoal, Simon Collins, reportedly said that second charge mortgages were “becoming much more mainstream,” and that the number of cases that the broker had handled had trebled between 2013 and 2014.

Furthermore, the 40 per cent rise to the end of February coincides with new regulations and rules that came in, which would arguably make getting a second charge mortgage more difficult, and potentially costly.

The Financial Conduct Authority now insist that lenders must stress test the borrower’s financial status to ensure they would be able to repay all of the loans that they have under hypothetical higher interest rates.

A second charge mortgage is a loan taken out, secured against the equity of a property that someone owns. This means that it can be taken out against a property that the owner is still paying the mortgage for. The second charge mortgage is secured against the amount that they have already paid on the first mortgage.

Second charges can be cheaper than remortgaging in some situations, especially if the homeowner has seen their credit rating drop.

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