The Intermediary – September 2026 - Flipbook - Page 75
S E C O N D C H A RG E
Opinion
A real positive
outlook
T
here has been plenty
of negative news from
around the world, to
add to the seemingly
constant heatwaves.
The overall feeling of
negativity hasn’t been helped by rising
domestic energy concerns with winter
weather just a few months away.
The good news is that the mortgage
market is yet again proving to be
relatively resilient in the face of
domestic economic turmoil and
the second charge market has
definitely prospered.
2026 is shaping
up to be a strong one
for the sector. Demand
from homeowners
seeking to expand or
revamp their existing
properties, rather than
purchasing new ones,
will increase the need for
alternative funding”
It could be argued that I am biased,
but my take on the prospects for
the second charge market is based
on the trends at work already this
year, rather than just the natural
optimism that stems from my
experience of being involved with a
successful lender.
The conditions for a good year in the
second charge space have been given a
not inconsiderable boost by the strong
finish to 2025 in terms of completions
and the strong pipeline already
building up this year. In anybody’s
language, it certainly provides a
strong base from which to progress.
According to official figures from
the Finance & Leasing Association
(FLA), lenders issued 10,577 new
loans totalling £571m, marking an
18% increase by value compared
to Q2 2025.
Another notable feature is the
continued narrowing of the margin
between first and second charge
interest rates, which is making the
second charge option more aractive.
Along with the more usual requests
for loan consolidation, we are seeing
an increase in enquiries involving
prime customers, which will surprise
many. Roughly 70% of the second
charge market is already made up
of prime customers possessing high
credit scores, good stable employment
and disposable income.
Why second charge?
There are many reasons to take out
a second charge, but principally,
clients want to borrow money in
the simplest way, without having to
forfeit their existing mortgage rate
by remortgaging to raise capital or
because early redemption penalties are
too steep.
With an estimated 1.8 million
fixed-rate deals expiring in 2026,
according to UK Finance, many
will have to refinance at potentially
higher rates that could bear lile
resemblance to the rates they stared
out with. Those borrowers face
average rates hovering around 5.52%
for a 2-year fix and 5.64% for a 5-year
fix. Also, for those whose credit
history has been compromised during
the last few years, replacing like for
like by product transfer might be
more problematic. In addition, a new
fixed rate mortgage, which might
include a request to raise capital for
home improvements, could be even
more difficult.
Brokers will not only be facing calls
to help clients transition to a new
fixed rate when their existing one is
LAURA THOMAS
is regional sales manager
at Equifinance
finishing, but also to find out
whether sums can be added to raise
more capital to extend properties or
renovate kitchens and bathrooms.
Mortgage lenders are going to be
especially careful of extending extra
funds given the cost of living increases
as well as any changes to credit status.
If first charge lenders are prepared
to allow a like-for-like product
transfer at the end of a fixed rate
deal, but not extra funds for home
improvement, then the interest in
second charge mortgages will come
under greater consideration as a
popular way to fill the funding gap.
In the wider capital raising sector,
advisers are already telling us that they
are taking account of concerns that
remortgaging can no longer simply be
a default choice for clients seeking to
raise capital. Recognition is growing
that the Consumer Duty framework
is helping accelerate greater and
more thorough consideration when
assessing the best funding vehicle for
capital raising.
2026 is shaping up to be a strong
one for the sector. Demand from
homeowners seeking to expand or
revamp their existing properties,
rather than purchasing new ones,
will increase the need for alternative
funding. Second charge lending,
which is faster to arrange and
more flexible than its first charge
stablemate, will win more fans
this year. ●
September 2026 | The Intermediary
73
