The Intermediary –- May 2026 - Flipbook - Page 61
S E C O N D C H A RG E
Opinion
secured loans?
cash or liquid savings in one go creates
a liquidity event. Capital that was
working in the business or earmarked
for investment gets absorbed by
HMRC.
With the second payment on
account due on 31st July and Making
Tax Digital now live for those
earning over £50,000, tax planning
conversations are happening earlier
and more frequently across this client
segment than we’ve seen before.
A secured loan allows a client with
equity to manage the timing of that
payment without disrupting their
business position or their mortgage.
It’s not about being unable to pay.
It’s about choosing where the money
comes from.
Counting commitments
Several lenders include existing
commitments in their affordability
assessment, even where the client has
funds earmarked to clear them before
or at completion.
It’s a criteria point that catches
advisers out, particularly where a
client is in a strong overall position,
but the current commitment level tips
the affordability calculation.
In these cases, a secured loan is
oen the cleanest route, delivering
the outcome without disturbing the
existing mortgage.
Restricted business purposes
Some lenders won’t consider business
purposes for further advances at all.
Others cap lending at certain loanto-value (LTV) thresholds or won’t
support new ventures. Many are
excluding tax bills, VAT payments,
and business capital injection from
acceptable purposes altogether.
The client’s need doesn’t disappear
because the mortgage lender has said
no, however. A homeowner with
meaningful equity who needs working
capital, a business investment, or help
We’re seeing clients
[with] solid cases hitting
a wall simply because
of how their existing
commitments stack up”
covering a tax liability still has a route
through a secured loan, and specialist
second charge lenders have criteria
built for exactly these scenarios.
The school fees question
Since VAT was applied to private
school fees in January 2025, we’ve seen
a steady increase in parents looking
to raise capital against their home to
cover the additional cost.
These aren’t clients in difficulty.
They’re homeowners with
meaningful equity, oen in possession
of higher value properties and
significant available equity, who want
to keep their children in the school
they’ve chosen without drawing
down savings or liquidating
investments.
Many mainstream lenders won’t
support school fees as a purpose
through a further advance, whereas
specialist second charge lenders oen
will. The loan sits behind the existing
mortgage, the rate and ERC position
remain undisturbed, and the client
manages the additional cost
without making a disruptive
financial decision.
It’s a clean use of equity, and one
that’s becoming increasingly relevant
as families absorb an effective cost
increase of up to 20%.
Too good to lose
We’re still seeing significant volume
from clients tied into fixed rates from
2021 and 2022.
A client on a low rate with two
or three years of ERCs remaining
who needs capital has a clear choice:
remortgage and lose the rate, or raise
the additional funds through a second
charge and keep it.
When the numbers are laid out,
most clients don’t have to think
very hard about which direction
makes sense.
The second charge sits behind the
first charge, and in many cases the
fixed terms can be aligned so both
facilities mature at the same time,
giving the client a clean exit point
with no ERCs on either side.
What to watch out for
The secured loan market isn’t
uniformly priced, and those
differences maer both to your
client and to your Consumer
Duty obligations. The two areas where
quotes diverge most are client fees and
valuation costs, and it’s the valuation
line that oen catches advisers and
clients out, because it doesn’t always
appear prominently in an initial
quote.
On a recent case, a client received a
quote through another referral route
showing a valuation fee of £1,350 on
top of a £5,000 broker fee, totalling
£6,350 before any lending had even
completed.
At Loan.co.uk, we don’t charge
separately for valuations on secured
loans; it’s included within our fee.
Our client fees are oen materially
lower than many referral routes, and
that’s something we can evidence
case by case.
Under Consumer Duty, advisers
are accountable for the full cost their
client ends up paying, not just the rate
or the monthly payment.
In today’s market, checking
the detail isn’t optional. It’s part
of delivering best outcomes and
fair value. ●
May 2026 | The Intermediary
59
