Over recent years, headlines such as “Ignore specialist lending at your peril” have become increasingly common, and for good reason. These serve as a vital reminder to brokers that expanding into the specialist lending marketplace is no longer optional but essential.
This particular headline appeared on Financial Reporter following a Modern Lender seminar at the Mortgage Adviser Event (MAE) in Manchester which saw a panel discussion emphasise the importance of leveraging specialist products, criteria and policy to meet clients’ evolving needs.
One key takeaway from this session was not only the value of the overall specialist market but the underutilised potential of second charge mortgages within this.
The second charge sector has certainly become an increasingly viable option for a variety of borrowing needs. The latest Finance & Leasing Association (FLA) data reported that the second charge mortgage market saw its eighth consecutive month of growth in August 2024, with business volumes 14% higher than the same period of 2023. A trend which suggests a growing need for flexible lending solutions, making second charge mortgages a product that brokers can ill-afford to overlook.
Unlike high-street lenders, specialist lenders often take a more personalised approach to underwriting. Many assess affordability based on individual income and expenditure rather than standard loan-to-income (LTI) ratios. This approach, combined with the ability to factor in multiple income streams, makes such lenders an attractive option for borrowers who don’t fit into the conventional lending mould.
Another advantage of dedicated second charge lenders is their flexibility around credit impairments, property types, and applicant profiles. For clients who need to raise capital quickly, these lenders tend to offer faster underwriting capabilities and turnaround times, making them ideal for time-sensitive needs like debt consolidation or home improvements.
In recent months, debt consolidation has increasingly focused on creating more disposable income for borrowers who are struggling with rising outgoings. Instead of simply consolidating debt, borrowers are using second charge products to better manage their monthly outgoings, providing a lifeline in today’s highly pressurised economic climate.
Interestingly, we’ve also seen a rise in borrowers using second charge mortgages to raise capital from their own homes, either to start building or expand their property portfolios. Some landlords have also taken advantage of these loans to make energy-efficient improvements to their rental properties,
The diverse range of specialist lenders in the second charge market means there’s almost always a solution for clients, regardless of their financial circumstances. Whether it’s complex income streams, property types, or credit issues, specialist lenders can offer the flexibility that mainstream lenders often struggle with, especially when it comes to affordability and risk. However, despite the clear benefits of specialist lending in certain cases and transactions, many brokers are still not doing enough to fully embrace these opportunities.
This is where a trusted packaging partner comes into play. These partners serve as an essential bridge between brokers and specialist lenders, helping to source and deliver tailored solutions in an increasingly complex market. As a rising number of borrowers deal with non-standard financial, personal and business circumstances, this engagement with a true specialist will enable brokers to broaden their toolkit and open the doors to alternative lending solutions such as second charge, bridging, development finance and commercial.
In the face of changing market dynamics, brokers must diversify their offerings and stay informed around emerging specialist lending opportunities, and those who embrace these opportunities by forging the right partnerships will be best positioned to meet the ever-shifting demands of today’s borrowers.
Donna Francis, Managing Director at Envelop
Recent Comments