Searches for second charge mortgages increased by 14% year-on-year in 2023, according to data from Knowledge Bank that’s been released for a dual-branded version of the Pepper Money Specialist Lending Study.
Knowledge Bank has partnered with Pepper Money to provide analysis of broker activity on the criteria search platform alongside the customer insights that were recently revealed in the specialist lender’s research study.
The 2023 Pepper Money Specialist Lending Study found that 15.16m people in Great Britain have a history of adverse credit – missed credit payments, defaults, County Court Judgements (CCJs), unsecured arrears, secured arrears or have entered a Debt Management Plan.
While Knowledge Bank said, there had been a modest increase in the searches for adverse in 2023 compared to 2022.
According to Knowledge Bank, the top five residential search terms were missed or late payments, defaults registered in the last three years, defaults registered more than three years ago, capital raising for debt consolidation and defaults over £500.
For second charges, Knowledge Bank says as well as the year-on-year increase, it also received a wider range of questions asked by brokers, with an increase of 77 more individual criteria searches from brokers.
The top search terms for second charges were capital raising for debt consolidation, Debt Management Plans, defaults over £300 or registered in the last three years, and credit repair for adverse credit.
Nicola Firth, founder and CEO of Knowledge Bank, said: “It was interesting to see that the top causes of adverse credit in the Pepper Specialist Lending Study mirrored exactly what we’ve seen brokers searching for on Knowledge Bank when trying to help their clients. “Missed or Late Payments” dominated searches.
“Second charge mortgages have been a talking point throughout the year. They provide a means for clients to reset their finances and get back in control.
“It is a route which requires specialist training to complete, but one which offers a more holistic approach to the advice journey for clients.
“You can see from the top five searches why second charges are such a hot topic, and the advice around these is key.”
Ryan McGrath (pictured), second charge sales director at Pepper Money, added: “According to our Specialist Lending Study, the most popular use for a second charge mortgage amongst those customers surveyed is for home improvements.
“Only one in four people (27%) would consider using a Second to consolidate debts if it reduced their monthly credit bill.
“This is probably indicative of the general lack of customer awareness of seconds, as the top Knowledge Bank search term for the product last year was debt consolidation. Plus, the majority of our completions are for debt consolidation.”
He added: “With the ongoing cost-of-living crisis continuing to put a squeeze on household finances and more people turning to credit to cover day-to-day costs, brokers have an opportunity to improve awareness of seconds and help customers get their debts under control and reduce their outgoings through debt consolidation.
“Simplifying multiple debts into a single repayment not only makes things simpler but can also dramatically reduce the cost of repaying that debt.
“It may not be right for everyone, but we think brokers will see even higher demand for second charge mortgages for debt consolidation in 2024 than they did in 2023.”
