The Intermediary –- June 2026 - Flipbook - Page 80
S E C O N D C H A RG E
Opinion
THE RIGHT QUESTION
f you ask me what I’m seeing
more of right now, it’s clients
looking for flexibility. Not
just more borrowing. Not
just lower rates. Genuine
flexibility in how they access
money and how they structure their
finances. That shi is changing the
conversations brokers need to have.
For years, remortgaging has been
the default answer whenever a client
wanted to raise capital.
Need money for home
improvements? Remortgage.
Need funds to consolidate debt?
Remortgage. Need help to cover
current and future School fees?
Remortgage.
The problem is that today’s market
looks very different to the one where
that approach became the norm.
Many borrowers are siing on
mortgage rates secured before interest
rates rose. They may have fixed rates
in the 2% to 3% range and several
years le to run. Those mortgages
have become valuable assets in their
own right.
Yet I still see cases where the first
instinct is to refinance the entire
mortgage balance and incur an early
repayment charge (ERC), even when
the client only needs a relatively
modest amount of additional
borrowing.
That is where I think brokers need
to pause and ask a different question.
It’s not ‘Can we remortgage?’ but
‘Should we?’ and ‘When?’
And that distinction maers. A
client might need £25,000, £50,000
or £100,000 for home improvements,
debt consolidation, school fees or
another planned expense.
If refinancing the entire mortgage
means paying significant early
repayment charges and replacing
a competitive rate with something
considerably more expensive, we have
to ask whether that is really the most
suitable outcome.
And in many cases, it isn’t.
Increasingly, advisers are recognising
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The Intermediary | June 2026
that second charge lending should be
considered alongside a remortgage
from the outset, rather than only
aer every other option has been
exhausted.
The beauty of a second charge is
its simplicity and its speed. Instead
of disturbing an existing mortgage
that may be working perfectly well,
the client can raise the additional
funds they need while leaving the first
charge untouched.
This allows the broker to consider
a remortgage at a more appropriate
time, when it is genuinely the most
suitable option.
Yes, second charge rates are oen
higher than mainstream mortgage
rates. But that higher rate applies only
to the additional borrowing, not the
entire mortgage balance.
When you factor in early repayment
charges and the cost of moving a
whole mortgage onto a higher rate, the
overall picture can look very different.
Borrower behaviour
What is interesting is how borrower
behaviour is changing alongside this.
More clients are choosing to stay
where they are rather than move.
Rising property prices; Stamp Duty
costs; legal fees and moving expenses
all play a role – let alone the cost of
running the home.
Many homeowners are deciding
that improving, extending or adapting
their existing home makes more
Borrowers can now
access products that
fit their circumstances
rather than forcing their
circumstances to fit
a product”
GEORGIA WALTON
is second charge mortgage
specialist at Brightstar Financial
financial sense than relocating. For
those clients, access to additional
capital becomes crucial.
Second charge lending can provide
that funding without disrupting
what may be a highly competitive
first mortgage.
The market itself has evolved
significantly, too. Some of the
perceptions that still exist around
second charges simply no longer
reflect reality.
Historically, second charge lending
was oen viewed as expensive, slow
and complicated. There may have
been some truth in that years ago, but
the sector has moved on dramatically.
Today we have greater lender
competition, streamlined
underwriting, widespread use of
automated valuation models and
much faster turnaround times.
In some cases, what previously
might have taken four to six weeks
can now complete in half that time,
and sometimes in as lile as a week.
Product flexibility has also
improved considerably. Features
such as tailored early repayment
charge structures and unlimited
overpayments give clients far more
control over how they manage their
borrowing.
Borrowers can now access products
that fit their circumstances rather
than forcing their circumstances to fit
a product.
