The Intermediary – October 2026 - Flipbook - Page 53
(ERC) and repricing a considerably larger
mortgage balance.
Brookes says: “The second charge arithmetic
can therefore be compelling. If a client has
Brookes argues that financial pressure and
strategic financial management should not
necessarily be treated as opposites.
“There is clearly greater pressure on some
£250,000 outstanding on a particularly
household budgets,” he says. “Several years of
competitive first charge rate, it may make more
elevated living costs combined with expensive
sense to leave that borrowing where it is and
unsecured credit have left some homeowners
finance the additional requirement separately.
with less monthly headroom, but there is an
“The headline second charge rate is only one
part of that calculation; it is the blended cost and
overall customer outcome that matter.”
However, Rebecca Wilkins, founder of Cutting
important distinction between financial pressure
and financial distress.”
A borrower may have a secure income,
considerable housing equity and an affordable
Edge Mortgages, reports a different pattern
mortgage, yet still find that credit cards, personal
among her own client base, with favourable rates
loans or vehicle finance are absorbing an
and criteria in the mainstream mortgage market
unsustainable proportion of monthly income.
allowing many to raise capital through a further
advance or remortgage.
Homeowners can also be asset-rich but
cashflow constrained, with substantial wealth
Wilkins says: “In our experience, second
tied up in their properties, but relatively
charges are now largely reserved for specific
little disposable income available to meet
scenarios, such as urgent funding needs,
immediate costs.
business use, or instances where first charge
Advisers are increasingly required to examine
lenders decline applicants on criteria or
the borrower’s complete household balance sheet,
affordability grounds.”
rather than focusing on individual products
Pressure or planning?
The changing market raises an important
in isolation.
Brookes asks: “What does the customer owe? At
what rates and over what terms? What equity do
question: are borrowers using second charges
they have? What are they trying to achieve? And,
because they are becoming increasingly
crucially, what will their financial position look
financially stretched, or are they making
like afterwards?”
more strategic use of the equity they have
“A second charge can be a very effective option
accumulated? For many in the industry, the
within that analysis, but only where the overall
answer is a combination.
numbers and circumstances support it.”
Tolfree says: “The important thing is
understanding what the customer is trying to
When life intervenes
achieve and making sure the solution genuinely
Life does not always fit neatly around fixed-rate
works for them, not just this month but over the
mortgage terms. Unexpected repairs, separation,
full term of the loan.”
family illness, education costs, redundancy and
p
October 2026 | The Intermediary
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