Cost of living crisis and seconds market

ended 05. April 2022

Anyone else remember that Ocean Finance ad from the 80s or early 90s when, at the end, some guy dives off a 5m board into a clear blue sea? You'll notice in the background, as he emerges from the brine, The Twelve Apostles, which are part of Table Mountain, in Cape Town. So he hadn't just been eaten metaphorically by loan sharks, but was just about to be literally eaten, too, as that particular ocean is jam-packed with Great Whites. 

Things in the seconds market have changed a lot since then, of course. There are some decent operators, rates aren't daft and a once much-maligned product is finally starting to be seen as a viable way to manage debt and reduce monthly outgoings - all the more important given the cost of living crisis. So we're keen to get your responses to the following questions:

  • Have you seen increased interest/enquiries from clients about seconds in recent months due to the cost of living crisis?
  • Could secured loans play a role in helping people combat the soaring cost of living? After all, used correctly, they can boost disposable income by significantly reducing monthly outgoings on unsecured debt?
  • What should people considering seconds be wary of (e.g. seconds are secured so homes are at risk, etc)?
  • Is the ‘slightly grubby’ tag that has applied to seconds over the years (in the media) still justified or should they be looked at in a different light?

Any other observations about the seconds market, feel free to jot them down. If you can give hypothetical examples of how seconds could be used to manage debt, that would be great. If you have clients who have used seconds to consolidate debt due to the cost of living crisis and would be happy to be featured in the media, let us know (long shot, of course).


5 responses from the Newspage community

The vast majority of brokers tend to run a mile if anyone metiions a second charge and most brokers aren't allowed to place them due to contstaints by networks. This is why it's vitally important to get advice from a genuinely independent broker, not the ones that pretend they are.
With the rising cost of living and wages not keeping pace there has never been a better time to spring clean the finances. With many clients in longer term deals the 2nd charge or secured loan is a great tool to use. I have a client who has slashed his credit payments by 75% clearing credit cards, personal loans and HP to a single affordable monthly payment that has no early repayment charge meaning it all gets rolled up at the next remortgage. The extra income left gives peace of mind when filling the car up can be scary. I want to get the message out that the days of last chance saloon lending with prices to match have long gone The 2nd charge is a flexible product that can help say yes to many people, but if only we can get the message out to them.
Second charge loans are an important part of a mortgage brokers tool kit, allowing clients to borrow against their property without having to change their current mortgage; but they are more expensive than first charge mortgages in terms of interest rates and fees, so before we look at a second charge as a solution we first need to look at a further advance (additional borrowing from the current mortgage provider), or even a full remortgage depending on what the costs of exiting their current mortgage are. Seconds do tend to be a more flexible method of secure borrowing when compared to a first charge mortgage; this maybe allows you to borrow more, or gives you access to finance with some recent poor credit, or maybe allows you to borrow despite having to become self-employed in the last couple of years - there are many reasons why a second charge loan can be the best solution for a clients needs.
We are finding that more clients are willing to consider offering a second charge on their home, as a way of securing a business loan. With house prices rising so fast, many are finding they have significant equity in their homes which can be used as security. Secured business loans are often at lower interest rates than an unsecured loan and have a much higher acceptance rate. However its important to understand that if the business fails to make the required repayements, then your hoem could be at risk.
Second charges are certainly not the only option for homeowners over the age of 55 to borrow more funds. We are finding that a significant number of our clients are either using Equity Release to raise funds to make their homes more eco friendly (solar panels, heat pumps etc.) or are raising further funds to help them cope with the cost of living crisis.