As we draw the curtain on 2025, it’s clear that the second charge mortgage market has become an increasingly indispensable part of the broker toolkit.
This year has been defined by both opportunity and challenge, but the trend line is unmistakable: second charge lending has continued its upward trajectory, with the market now set to surpass £2bn by year-end. A standout example is a near £500,000 loan Pepper Money supported for a family who had recently bought a new home and needed substantial renovation funds after their high street lender declined further borrowing.
The mortgage enabled them to consolidate commitments and raise additional capital for renovation costs and other liabilities. Interestingly, we’ve seen greater use of second charge mortgage for home improvement like this throughout the year, coupled with investment for business purposes and energy-efficient upgrades. All this shows customers are looking to maximise property value while managing their finances more effectively.
A market growing in scale and purpose
The drivers of growth in 2025 have been numerous. Affordability pressures, high remortgage costs and the desire for customers to retain competitive first charge rates all contributed to the decision. Our Specialist Lending Study 2025 underlined this reality, revealing that 48% of UK adults have less than £0-10,000 in savings, leaving many households with limited buffers against rising costs or unexpected expenses. Against this backdrop, brokers are increasingly recognising that second charges can deliver tailored, flexible solutions for customers whose borrowing needs don’t neatly fit the constraints of a single remortgage or further advance.
Choice, competition, and innovation
One of the standout developments of 2025 has been the expansion of lender choice and product diversity. The market now offers a wider range of rates, terms, loan sizes, and credit profiles than ever before, a key example is our 100% loan-to-value (LTV) product. These enhanced options give customers more choice and boosts broker confidence.
A notable element of this product evolution has been the rise of no early repayment charge (ERC) products, including within the Pepper Money range. These products have resonated strongly with customers who value flexibility, especially those who foresee refinancing opportunities in the future or who want the freedom to repay without penalty.
Service transformation and friction reduction
Over the past year, the second charge sector has made significant strides in improving underwriting consistency, communication and digital processing – improvements to automated valuation models (AVMs) have made the application process smoother than ever, for example. This enhanced packaging, clearer criteria and better digital integration is creating a more frictionless experience.
At Pepper Money, this has been a core priority. We’ve invested in technology that shortens turnaround times, improves transparency at every stage of the customer journey, and reduces the administrative burden for brokers. These enhancements are fundamental to supporting Consumer Duty and ensuring that good outcomes are baked into the process, not retrofitted after the fact.
A credible alternative to unsecured borrowing
Perhaps the clearest sign of the sector’s maturation is that second charges are now widely recognised as a credible alternative to unsecured borrowing. With higher unsecured rates and shorter repayment terms often unsuitable for meaningful debt restructuring or larger-value projects, second charges can offer customers greater affordability, stability, and long-term financial planning capability.
This is a powerful proposition, but only when paired with expert advice. Brokers are uniquely positioned to guide customers through the decision-making process, weighing the merits of a second charge against remortgaging, further advances, and unsecured credit, such as personal loans.
What 2026 holds
Looking ahead, we fully expect the second charge market to continue its growth path into 2026. Our Specialist Lending Study found that 56% of UK adults are worried about their financial position due to the current economic climate, while 30% are putting less into their savings than a year ago. Along with economic drivers, we also expect deeper structural changes: increasing broker confidence, more sophisticated digital journeys, richer data insight, and broader product choice.
For Pepper Money, our focus for the year ahead is simple: continue investing in flexibility, service excellence and responsible lending.
Second charges have firmly established themselves as a vital part of the UK lending ecosystem. As we enter 2026, our aim is to keep supporting brokers with the tools, products and service they need to deliver outstanding results for their customers. The market’s momentum is strong, the opportunities plentiful, and the future for second charge lending brighter than ever.
Ryan McGrath is sales director at Pepper Money
