Second charge mortgages have cemented their position as the fastest-growing segment in the post-pandemic UK property finance market, according to new research by Pepper Money.
Analysis of official data from the Bank of England and the Finance & Leasing Association (FLA) shows that the second charge market has expanded by nearly a third (31%) since the start of 2020, marking the highest growth rate in the market.
In the second half of 2024 alone, growth in this segment surpassed the previous year’s performance by 25%. The next fastest-growing market segment was first-time buyers, which saw an annual 21% increase.
Second charge mortgages experienced nearly ten times more lending activity than the buy-to-let market and a 33% higher growth rate than all homebuyer lending.
Additionally, second charge loans saw four times more growth than the remortgaging market, which faced an 8% decline in value in 2024 due to an unfavourable interest rate landscape.
Overall, homeowners accessed £1.7 billion in equity via second charge mortgages in 2024 (up from £1.4bn in 2023), and a total £6.5bn of housing wealth has been accessed by property owners in this way since the start of the pandemic, a 27% increase compared to the preceding five years.
Pepper Money’s own data shows customers are using secured loans primarily for debt consolidation, home renovations and occasionally to pay tax bills such as the new VAT on private school fees. With new tax rises coming into effect from April, the second charge market is in a position to grow even further still.
Ryan McGrath, director of second charge mortgages at Pepper Money, commented: “It remains a challenging lending environment with the cost-of-living crisis continuing to act as a barrier to improving people’s financial positions and higher interest rates causing buyers to deeply consider their options out of fear of disturbing their existing, favourable, fixed-term deals. But the reality is people can’t put their lives on hold until interest rates fall which has paved the way for secured loans to rise significantly in popularity, enabling homeowners to tap into the equity they’ve built up in their homes and use this to meet their current financial needs without disturbing their main mortgage.
“Recent FLA data shows that the second charge mortgage market grew by 29% in January compared to the previous year, and it’s expected that around 40,000 households will turn to homeowner loans in 2025. The market grew faster than the homebuyer lending market as a whole and remortgaging market too, to reach £1.7bn in 2024 and positioning itself well for more to come in 2025 to meet the clear demand from homeowners.
“In these challenging times, second charge mortgages have remained relatively insulated from the severest examples of financial turmoil, partly due to the flexibility they can provide homeowners needing to borrow over a longer period such as lower interest rates compared to unsecured borrowing and the ability to spread costs to make repayments more manageable.
“With mortgage rates still high and inflation easing slower than hoped, anyone considering home renovations, buying another property, or consolidating debt should assess all their options—including second charge mortgages.”
