The Intermediary – February 2026 - Flipbook - Page 65
S E C O N D C H A RG E
Opinion
AI – A doubleedged sword?
O
ne of the key trends
of second charge
lending at this time
of year is the number
of enquiries from
advisers whose
clients want to raise funds to pay
January tax calls. It might seem odd
that businesspeople have not planned
their tax money accordingly, so we
insist on knowing why they didn’t
have enough squirreled away to pay,
and how they will pay next year. In
most cases, as we discovered, many
businesspeople simply reinvested
profits, which in turn le them short
when it came to handling tax calls. In
a market where annual lending now
totals close to £2bn, tens of thousands
of new agreements such as these are
completed each year.
The seconds market has grown by
more than 30% since 2020, making it
one of the fastest-growing specialist
lending sectors. In fact, there is
evidence that second charge lending
is beginning to rival bridging finance
in terms of volume. Second charge
mortgages have also outperformed
some traditional mortgage segments
in growth, including certain buy-to-let
(BTL) and home mover categories.
Rising house prices over recent
years have increased available
homeowner equity, making second
charge mortgages a viable funding
option. Higher interest rates on firstcharge remortgages have encouraged
borrowers to look at alternatives
rather than refinance their main
mortgage and financial advisers
are beginning to understand the
advantages of a second charge option
as the product is increasingly seen as a
flexible financial planning tool rather
than a last resort option.
As a side note, second charge
mortgage new business volumes grew
by 27% in November 2025 according
to the Finance & Leasing Association
(FLA). Not only did business volumes
grow significantly that month, but
the second charge mortgage market
has reported growth in new business
volumes in all but one month in 2025.
The trend looks like it is going to
continue in 2026.
However, rapid growth in the
second charge mortgage market
inevitably puts pressure on speed,
accuracy and risk management. It is
against this backdrop that technology,
particularly artificial intelligence
(AI), is beginning to play a more
prominent role.
Evaluating risks
AI and its effect on the mortgage
market is a topic which has already
had plenty of airing. From our
perspective as a major lender in the
second charge sector, we see the
benefits of AI, but it would be foolish
not to acknowledge the other side of
the coin; how AI can mask significant
potential drawbacks.
On the face of it, AI looked like
the answer to the perennial issues
surrounding the need to speed up the
mortgage process. Its ability to help
package applications more quickly and
accurately means that efficiency can
be boosted. It provides underwriters
with tools that, when blended with
their human expertise, creates a
more robust framework for geing
applications through to completion.
For brokers AI will help streamline
processes surrounding the packaging
of cases and make the whole exercise
more efficient. Affordability
LAURA THOMAS
is regional sales manager
at Equifinance
assessments become easier to prove –
especially useful when professional
landlords are relying on accurate
assessments of their property
portfolios, for example.
However, in all the hype about
the crucial role that AI can perform
to support the mortgage process,
we must remember that there are
also some negatives to consider. The
prospect of AI contributing to a higher
risk of fraud needs to be taken into
account. AI, while being a particular
benefit to the mortgage industry can
also be used to increase the risk of an
increase in fabricated wage slips and
other supporting documentation. This
means that lenders are going to have
to be more aware of the potential for
false documents being presented to
support applications.
So, AI can become a double-edged
sword unless it can be controlled
properly. The next few years will
reveal whether or not AI can police
itself, allowing lenders and brokers
to extract the maximum benefit and
minimise the more negative aspects of
how it can be used. ●
AI promises faster lending - but the mortgage market still relies on human communication
February 2026 | The Intermediary
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