Going into 2023 it’s safe to say that there’s still much uncertainty amongst consumers about the economic landscape. The cost of living crisis is impacting almost everyone – and the financial industry can see this more than ever.
According to the Finance & Leasing Association (FLA), new second charge mortgage business grew by 18% in October 2022 (compared with October 2021), with 3,000 new agreements. 57% of those agreements were for debt consolidation, so it’s clear that many people are looking to streamline their finances to try and soften the impact of rising costs elsewhere.
If it’s like that going into 2023, we’re going to see more people struggling with the rising cost of living, so may look to reduce their monthly outgoings and second charges can continue to help brokers and consumers alike.
After the Bank of England base rate hit 3.5% in December 2022, and with the average mortgage rates being more than double they were this time last year, many customers may have already locked into a fixed rate mortgage and others may hold off remortgaging in order to raise additional funds. This is where a second charge can be a lifeline. Customers can avoid costly ERCs, keep their mortgage rate and consolidate their finances to help them navigate the cost of living crisis with more confidence.
According to Savills, house prices are forecast to fall in 2023, which may mean that consumers may look at improving their own houses, rather than turning to a new purchase. Again, a secured loan can prove to be invaluable in this situation – and is already considered by many as 15% of the 3,000 second charge agreements in October 2022 were for home improvements; plus, 22% was for home improvements and debt consolidation. Refurbishments and extensions may be considered to not only improve the value of the current property, but to also to help keep customers at bay whilst the market improves.
Credit card rates have also recently hit their highest rates in two decades, so those who are reaching the end of any promotional offers may now look to consolidate their debts with a lower rate to keep their monthly costs down.
So, despite all the negative predictions for the year ahead, it could be looking like a successful year for second charge mortgages, so make sure you consider them as an option for anything that comes across your desk.
Do you have a second charge case that you'd like to talk to us about? Give us a call on 01709 321665
