Second charge can offer a lifeline for brokers above 85% LTV borrowers
26 October 2020
With many brokers struggling to place remortgage deals in the above 85% loan-to-value (LTV) range, expert specialist brokerage Loans Warehouse has called on the market to remember the key role second charge lending can play in filling the void.
Last week figures from Moneyfacts revealed that the total number of available mortgage products had dropped from 5,222 mortgages in March to just 2,259 in October.
The same data also revealed that the number of mortgage deals above 85% LTV had more than halved to 329.
Mel Spencer, head of MCI Mortgage Club, attributed the decline to the issues lenders were having with service levels in the face of increased demand for such products.
She said: “The high loan-to-value market is very limited at present and there are very few products available to help those that require a 90% product to move home, remortgage or borrow additional money for home improvements/extensions.
“If products do become available then they don't hang around for long and you will see that they are typically here for 48 hours, which can be known as a ‘flash sale’.
“High street lenders are slowly working towards full capacity and are still hitting a record number of applications due this pandemic.
“We have not seen lenders come back in this market at strength and we need more support in the industry to service these clients that require a high loan-to-value mortgage.
“We have seen Building Societies provide products to local clients and also products such as family assist.”
Whilst the personal loan market is still struggling in the post-national lockdown market Loans Warehouse has seen a surge in demand for second charge products – which could help brokers support borrowers looking for higher LTV borrowing.
The latest figures from the Finance & Leasing Association (FLA) revealed that the market had grown over 100% from May to August this year and has predicted that growth in Q4 could see that figure double again.
Matt Tristram, co-founder of Loans Warehouse, said: “Whilst some lenders have restricted product ranges on LTV, the biggest lenders in second charge lending, our HSBC & Santander’s if you like, continue to offer very competitive products right up to 100% LTV.
“Optimum Credit and Oplo have led the second charge recovery in recent months and both offer an alternative to a remortgage over 85% LTV.
“Optimum Credits securitisation announced last month gave a new lease of life to their XLTV range specifically catering for clients borrowing between 85% to 100% LTV.
“Recent market leader Oplo has also maintained strong lending levels throughout 2020 up to the same LTV they always lend too.”
The two lenders both boast loan offerings of up to £100,000 with fixed, variable and discounted rates.
Most importantly these products come with low early redemption charges (ERCs) allowing a cost-effective settlement later down the line when other options come to market.
Tristram added: “Loans Warehouse works across the whole spectrum of property finance which allows us a vantage point to identify sectors of the market which experience service issues.
“We’ve seen both lenders provide market-leading service to Loans Warehouse in recent weeks and months.
“Notably Optimum recently turned a newly submitted case to offer within hours from start to finish and both lenders will have offers issued on the day of receipt of a new submission if the quality of packaging is there.
“With brokers struggling to find options for high LTV borrowers and a lack of ERCs second charges can provide a valuable alternative for those looking to place such cases before the market fully recovers.”
