Homeowners are increasingly taking out second charge mortgages against their homes, new figures show, with the value of these loans jumping by nearly a third in just a year.
This surge in popularity comes as more of us look for ways to unlock cash tied up in our properties, with home improvement projects and consolidating existing debts among the most common reasons.
The latest data from the Finance and Leasing Association (FLA) reveals that over £163 million worth of new second charge mortgages were agreed in July 2024 alone, a hefty 30% leap compared to July 2023.
Second charge mortgages: A growing trend
This upward trend isn’t just limited to a single month either. Looking at the bigger picture, the FLA reports that:
- July saw 3,364 new second charge agreements, contributing to a total of 9,340 new agreements between May and July this year.
- This represents an 18% increase in the number of new second charge mortgages compared to the same three-month period in 2023.
- Over the last year (July 2023 to July 2024) the number of new second charge mortgages has grown by 3%
Why are second charge mortgages on the rise?
Fiona Hoyle, Director of Consumer and Mortgage Finance and Inclusion at the FLA, suggests this surge in second mortgages is partly fuelled by growing confidence in the UK’s economic outlook, leading to more people feeling comfortable taking on additional borrowing.
So, what are people using these second mortgages for? The FLA’s breakdown for July 2024 reveals the top reasons include:
- Consolidating existing debts: 58.8% of new agreements
- Home improvements combined with debt consolidation: 21.6% of new agreements
- Home improvements alone: 12.6% of new agreements
It’s important to remember that taking out any form of loan, including a second charge mortgage, is a significant financial commitment. Always speak to a qualified financial advisor to ensure it’s the right decision for your individual circumstances.
And, if you are struggling to meet any existing loan repayments, contact your lender at the earliest opportunity to discuss your options.