The Intermediary – February 2026 - Flipbook - Page 63
S E C O N D C H A RG E
Opinion
Growth, maturity
and a test of
discipline
T
he second charge
market has entered
2026 in a strong
position with the
sector reported to have
experienced significant
growth in 2025. As the Finance and
Leasing Association (FLA) reported
there was a 27% increase in new
business volumes in November last
year compared to the previous year.
What was once regarded as a
niche, tactical product, seconds have
started to become a mainstream part
of holistic mortgage advice, used to
unlock trapped equity and provide
flexibility in a higher-for-longer
rate environment.
Volumes, lender participation and
broker confidence have all grown
materially. The real question now isn’t
whether the second charge market
will continue to expand – it’s how it
grows, and whether the competitive
changes we’re seeing genuinely
prioritise good customer outcomes or
simply focus on driving profit.
Tailwinds remain in place
The fundamentals are compelling.
Millions of borrowers remain on
historically low first-charge fixed
rates, many unwilling – or unable – to
refinance at today’s higher pricing. At
the same time, household budgets are
under pressure from the higher cost of
living and in other scenarios a wish to
carry out home improvements, fund
private schooling and support laterlife borrowing needs.
Second charges sit neatly in this
gap. They preserve a favourable
first-charge rate, provide speed and
flexibility, and increasingly allow
advisers to deliver beer overall cost
outcomes than a full remortgage.
From a pure advice perspective, they
are now a core consideration rather
than a contingency. It is no surprise,
then, that new lenders continue to
enter the space.
Increased lender choice has
undoubtedly improved pricing, and
product breadth. But with that comes
a risk the market must acknowledge:
too many lenders chasing the same
borrowers can distort behaviour.
We are already seeing signs of
margin compression, increasingly
nuanced credit policy flexing, and in
some cases, a subtle reframing of risk
to justify volume. That should give
senior professionals pause.
Second charge lending is a
regulated mortgage business. Yet, I
have a growing concern that some
propositions are being positioned in
a way that feels closer to unsecured
lending than to fully aligned mortgage
advice under Mortgage Conduct of
Business (MCOB) principles.That is
not an accusation, but it is something
the industry should keep an eye on.
The customer outcome test
The industry must guard against
allowing competitive pressure to
dilute standards. Key questions
advisers and lenders alike should be
asking include:
Are affordability assessments robust
under stressed scenarios, not just
today’s rate?
Is the customer genuinely beer
served by layering secured debt
rather than restructuring?
Are loan terms, consolidations and
future flexibility being explained
clearly – or merely justified?
Would this recommendation stand
up to scrutiny from the customer,
the regulator and our peers?
The risk is not that second charges are
inappropriate – far from it. The risk
is that they become too easy to justify,
BUSTER TOLFREE
is managing director –
mortgages, BTL and bridging
at United Trust Bank
particularly in complex cases where
speed, equity and short-term relief are
prioritised over long-term outcomes.
Regulatory oversight
The second charge market has
benefited enormously from clear
regulatory oversight by the Financial
Conduct Authority (FCA) and from
the professionalism brought by
advisers who understand MCOB
inside out.
As competition intensifies, the
industry should resist the temptation
to view regulation as a box-ticking
exercise or an obstacle to innovation.
Instead, it should be the anchor that
differentiates high-quality lenders
and advisers from volume-driven
entrants. Markets that forget this
lesson tend to relearn it the hard way.
A defining year
Second charges are no longer proving
their relevance – they are proving
their maturity. With that comes
responsibility. For lenders, it means
pricing for sustainability, not just
market share. For brokers, it means
advice that is demonstrably holistic,
not transactional. For the industry as a
whole, it means ensuring growth does
not come at the expense of trust.
If the sector gets this right, second
charges will continue to earn their
place as a respected, regulated and
customer-centric solution. If it
doesn’t, the risk is not regulatory
intervention alone, but reputational
damage that takes far longer to repair.
2026 will show which side of that line
the second charge market chooses to
stand on. ●
February 2026 | The Intermediary
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