Evolution Money: the second burden of debt consolidation increases


Second load products, in volume and value, are more likely to be required by debt consolidation borrowers than primary borrowers, according to Evolution Money’s quarterly data tracking.

Looking at his total credit data for the last three months, up to the end of November 2021, the product divided by mortgage volume is 77% debt consolidation / 23% premium and in value 67% debt consolidation. debts / 33% premium.

In the previous two quarters covered by the tracker, the volume of loans to senior borrowers was about 10% higher than this quarter, and there was a more even split between debt consolidation and prime rate. .

mortgage size

Loan warehouse: second loan charge up 7%

For borrowers who specifically use a second mortgage for debt consolidation purposes, the average loan amount increased only slightly to £ 21,448, with an average term of 123 months, and the loan-to-value ratio Average (LTV) also increases to 73.9%. .

Borrowers, on average, continued to consolidate five specific debts, but the average value of consolidated debts rose to £ 15,358.

For blue chip borrowers, the average loan amount also increased to £ 35,215, with an average term of 153 months, and an average LTV also dropping from 69% to 72%.

The main borrowers generally take back these second mortgages for debt consolidation (55%), home renovation and certain consolidations (23%) and home renovation (18%).

Borrowers also used second charge loans to pay for vehicles and finance existing business ventures. The average number of specific debts consolidated by major borrowers remained at five, and the average value of debt rose again to £ 23,160.

Steve Brilus, Managing Director of Evolution Money, said: “Second load products have always been used by homeowners for debt consolidation purposes, but in previous versions of the tracker we were starting to see an increasing number of Prime borrowers use the latter for purposes that weren’t just for paying off debt.

“This time around, however, it is clear that there has been a comeback in favor of debt consolidation and this is likely to be fueled by data from a period when government support was being withdrawn. , especially with regard to time off, and the fact that many people who had accumulated debts during the pandemic were looking for solutions to pay off these more expensive debts.

“Perhaps this is why we have seen an increase in both the loan size and the average value of debt consolidated by Debt Consolidation and Senior Borrowers, and why LTVs have increased.

“We shouldn’t underestimate the benefits that debt consolidation can offer and with second charge rates likely to be much lower than many other forms of debt, it makes perfect sense for some homeowners to take out a second. charge and reimburse them more expensive. debts first.

“It is likely that as we approach 2022, debt consolidation will remain the main reason for taking out a second mortgage, but we should not exclude more prime borrowers requiring these products, especially if they were able to get a super tough mortgage. Competitive first charge rate over the past 12 months, but still find themselves under the obligation to access additional equity.

“2021 has been a very strong year for the seconds market, and we certainly think 2022 will be the same. This is a growing area of ​​the market in which advisors should be active in helping these clients with these specific requirements.


Michael M. Tomlin