Second charges are more likely to be used for debt consolidation in the fourth quarter


“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in favor of debt consolidation and this is likely to be fueled by data from a period when government support was withdrawn.”

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.

This is compared to the previous period when the volume and value of loans to debt consolidation borrowers were lower. In the previous two quarters covered by the tracker, volume lending to blue chip borrowers had been around 10% higher than in the fourth quarter, and there was a more even split between debt consolidation and prime. .

Evolution Money says the tracker may well show the impact of ending government programs, such as leave payments, as homeowners need to find other sources of money and look to use their equity to pay off debts accumulated during. the pandemic.

For borrowers who specifically use a second mortgage for debt consolidation purposes, the average loan amount only increased slightly to £ 21,448, with an average term of 123 months, and the average LTV is also increasing. at 73.9%. Borrowers, on average, continued to consolidate five specific debts, but the average value of consolidated debts rose to £ 15,358.

Trend data continues to show consistency between the most common uses of a second mortgage for debt consolidation. Almost half were used to pay off a loan provider, followed by a bank payment, retail credit repayment, followed by auto financing.

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%).

Steve Brilus, CEO of Evolution Money, commented: “Second Loads 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 Principal Borrowers using Seconds for purposes that weren’t just to pay off debts.

“This time around, however, it is clear that there has been a comeback in favor of debt consolidation and this is likely fueled by data from a period when government support was being removed, particularly regarding time off, and the fact that many people who had accumulated debts during the pandemic were looking for solutions to repay 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 Blue Chip 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 that some homeowners take on a second charge and pay off their most expensive debts first.

“It’s likely that as we move into 2022, debt consolidation will remain the number one reason for taking out a second mortgage, but we shouldn’t be excluding more prime borrowers requiring these products, especially if they are. they were able to secure an ultra-competitive market. first charge rate in the last 12 months, but still have to access additional own funds.

“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