The Intermediary – October 2026 - Flipbook - Page 54
result, applications can sometimes
“As a r
move from submission to completion
within days, depending on the case."
Dealing with debt
While the product’s uses are
broadening, debt consolidation
remains the most significant
driver of second charge lending.
58.3% of second charge
agreements in 2025 were
solely for debt consolidation,
while a further 23% combined
consolidation with home
improvements,
according to the FLA.
imp
That pattern
continued into 2026, with
patt
consolidation
featuring in at least 60% of new
consolidati
business in June.
Jun
Lau says: “Borrowers
who have built up
“Bo
"No need for a new model, I can work with
what you've got"
balances across
several forms of credit, often
a
with different interest rates and repayment
dates, are using second charges to bring those
commitments into one monthly payment. This
can help reduce monthly outgoings and make
changes in caring responsibilities can all create
an urgent requirement for capital.
Brookes says: “One of the realities of financial
planning is that life is rarely as neat as a 5-year
However, Chambers warns: “A lower monthly
payment can create valuable breathing space, but
it is not the same thing as a lower overall cost. If
mortgage cycle. People’s need for capital does
repayments fall because the debt is being spread
not necessarily arrive when their fixed rate
over many more years, the borrower could end up
conveniently ends.”
paying more interest in total.”
For families with relatives living overseas,
Brookes cautions against considering lifetime
for example, illness, bereavement or changing
cost without also assessing the possible cost of
care needs can result in unexpected travel and
doing nothing.
accommodation costs, sometimes involving
He says: “If existing commitments are
repeated international journeys alongside the
consuming too much disposable income,
cost of supporting the relative directly.
creating sustainable monthly headroom can
Career changes can create further
complications. Redundancy or an unexpected
itself have considerable value. Allowing the
position to deteriorate until payments are
loss of employment may result in short-term
missed can damage a customer’s credit profile
financial pressure, while retraining, starting a
and potentially push some of the best-priced
business or moving into self-employment can
financial products out of reach – sometimes
create a planned need for capital.
Brookes stresses that these cases require
careful advice and underwriting, saying:
“Releasing property equity should not be used
to disguise an underlying affordability problem.
But for a homeowner with adequate resources
and a credible longer-term plan, access to
capital can provide useful flexibility during a
transitional period.”
The need for scrutiny does not mean slowing
down access to finance needed in a pinch.
Lau adds: “Greater use of technology across
the market means lenders can often move much
52
household budgeting easier.”
for a considerable period. So there is a balance
between lifetime cost and financial resilience.”
Advisers must also establish how the debts
arose, and whether consolidation addresses the
underlying issue, or simply compounds it.
Chambers warns: “One of my biggest concerns
is what happens after consolidation.
"If someone clears their credit cards and
then builds those balances back up, they can
end up with both the secured loan and new
unsecured debt.
“We aim to have those honest conversations
about how the debt arose and whether
faster than they could in the past, with fewer
the proposed arrangement is sustainable.
physical documents required and, in some cases,
Consolidation changes how a debt is repaid; it
no need for a full property valuation.
does not make it disappear.”
The Intermediary | October 2026
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