By Lucy Waters - Managing Director for Aria Finance
Latest figures from the FLA suggests demand for new second charge mortgages is growing. While demand has grown, I’ve heard from many brokers who aren’t seeing a direct, positive impact on their business.
This is likely because demand growth has been met with new brokers and lenders entering the market.
Despite increased competition, intermediaries have a prime opportunity to differentiate themselves by becoming more attentive to the needs of borrowers and leaning on strong packager relationships that invite new business.
Intermediaries must understand borrower positions
Very few borrowers know about second charges as a secured lending option, with many likely holding out for a remortgage deal to raise equity.
However, remortgaging in current conditions makes little financial sense to borrowers currently on a low 5-year fix secured before September 2022.
Economic turbulence has also meant that more borrowers fail revised high street affordability tests since receiving their present deal.
Additionally, many consumers have had to deal with an ongoing cost-of-living crisis. These borrowers have had to lean on unsecured debt, with a rise in loan defaults, meaning they fail the credit assessments of most high street lenders.
Intermediaries must recognise opportunities to turn clients to specialist finance solutions.
Intermediaries must understand borrower needs
Rising living costs, changes in spending habits, and recent changes to work patterns are providing new reasons for borrowers to seek secured loans.
Disposable income is being eroded, with rising inflation and higher diversification of expenses (such as increases in subscription and delivery services, micro-transactions, and eCommerce). Debt and defaults are also becoming more common as credit card use increases and high-risk alternative credit lines like BNPL grow in popularity.
Global attitudes towards work and home have also changed. People are spending more time at home in remote, hybrid, or flexible working roles. This means homeowners are noticing areas for improvements, while renters are placing pressure on landlords to adapt living spaces to the new world of work.
Many borrowers look for an answer in secured loans, and as a result, debt consolidation and home improvements are now accounting for over 92% of all second charge loans.
Strong packager relationships matter now more than ever
With a growing variety of second charge lenders on the market, brokers can be forgiven for not knowing where to start. This is where partnerships with packagers like Aria Finance are vital.
Packagers have access to a diverse range of lenders, some of whom have specific products for borrowers:
- with adverse credit
- with affordability concerns
- with variable income
- who require higher LTI
- who qualify for market-leading rates
- who let out properties
The list goes on, but it illustrates the growing diversity in borrower requirements.
In my experience, intermediaries who clearly communicate client needs enable their packager partners to identify suitable second charge solutions with much greater efficiency.
Please reach out to our team to find a suitable second charge solution that matches your client’s unique circumstances.
