The market for second charge borrowing is continuing to “reflect the wider economy” and the financial concerns of many individuals seeking to get a grip on an increase in both the cost of living and the cost of securing finance, Evolution Money has stated.

According to the second charge lender’s latest data, covering the three months to the end of November, the product split by volume of mortgages was once again 68% debt consolidation and 32% prime, and by value 59% debt consolidation to 41% prime.

Evolution Money’s quarterly tracker analyses data from two different types of second charge mortgage products, split between those borrowers using the loans for debt consolidation purposes only, and those clients who have prime credit ratings.

This iteration of the tracker mirrored the last data in terms of both volume and value of second charge mortgages taken by both sets of borrowers, with the number of prime borrowers utilising the products holding steady. Prime borrowers are able to use their loans for other purposes, not just debt consolidation, Evolution Money said.

Evolution Money CEO, Steve Brilus, commented: “This latest tracker shows what is happening right across the financial spectrum for many individuals in the UK right now, with pressures from high inflation continuing to bite and the increased cost of first charge mortgage rates meaning many borrowers are looking for alternatives to straight remortgaging which would undoubtedly cost them more than their existing first charge.

“Add in the potential for early repayment charges, plus increased costs for other types of borrowing, and it’s not surprising to see homeowners looking at the ways and means by which they can extract equity grown over the last few years, specifically to pay off higher-charging debts, but also to fund other commitments.”

Evolution Money also revealed that its latest iteration of the tracker continued the trend whereby, for those borrowers specifically using a second charge mortgage for debt consolidation purposes, the average loan amount continued to increase, and was now over £25,000.

The average term for these borrowers had also increased again to 135 months, with borrowers seeking longer terms which would make the monthly payments more manageable. This data also showed the average LTV was up, and borrowers continued to consolidate more debts than their prime borrower counterparts, with the average value of debts consolidated also inching up again to £18,322.

Brilus added: “Average loan amounts have increased for both prime and debt consolidation borrowers, plus the terms have also increased as borrowers seek to make monthly second-charge payments affordable.

“As a result, we are continuing to see prime borrowers looking at their second-charge options and would anticipate this will continue throughout 2023 even if, as anticipated, inflation does start to fall back and there is a corresponding drop in first-charge mortgage rates.”

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