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Average second charge loan size increases by 83%


Average second charge loan size increases by 83%

Second charge master broker V Loans has seen an 83% rise in its average loan size compared to 2014.

V Loans’ loan book data showed that the average second charge loan was now £67,301, compared with £36,742 in 2014.

The reason behind the increase is due to V Loans revealing that one in three second charge loans have been used for home improvements this year.. 

The master broker found that 33% of second charge loans between January and August were used for home improvements, compared with 17% in the same period in 2014. 

V Loans also reported an increase in the number of second charge loans being used for property purchases and mortgages with figures growing from 2% in 2014 to 13% so far this year.

Meanwhile, debt consolidation, which was the most common use of a second charge in 2014, has seen a significant drop, falling from 75% to 36%.

LOAN PURPOSE

JANUARY TO AUGUST 2014 SHARE

JANUARY TO AUGUST 2016 SHARE

Debt consolidation

75%

36%

Home improvements

17%

33%

Business purposes

3%

6%

Other

3%

10%

Property purchase

2%

12%

Car

1%

1%

Mortgage

Zero

1%

Personal purposes

Zero

1%


The change in loan purpose shares between 2014 and 2016 across V Loans business 

Marie Grundy, managing director of V Loans, felt that the switch from debt consolidation to home improvements had been dramatic over the past two years and its own loan book had shown how the market was changing.

“It is particularly interesting to see the change in views among brokers about borrowers who can benefit from a second charge, such as customers who do not want to lose fixed or tracker deals by remortgaging as well as interest-only customers and people facing early redemption charges.

“The MCD [Mortgage Credit Directive] has speeded up the process by removing cooling off periods, and because a solicitor is not required for most second charge transactions, this not only helps with the speed of transactions, but reduces costs.”




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