Experts have predicted that second charge lending will grow by 100% in the second quarter of 2020.
Leading second charge brokerage Loans Warehouse made the prediction about second charge loans, where borrowers are able to use existing equity in a property towards a second loan, after seeing some market recovery following the lockdown caused by the coronavirus pandemic.
In February 2020, prior to the coronavirus lockdown, second charge lending was standing at a total of around £107million however by May this figure had declined by 81% to just £21million.
However since lockdown restrictions began to ease the market has begun to recover and by August lending had more than doubled to £43million.
It was this level of recovery that led Loans Warehouse to make the prediction that the final quarter of the year, Q4, will see an increase of 100%.
Matt Tristram, co-founder of Loans Warehouse, said: “Despite the pandemic we have traded throughout the year and it is our opinion that the opportunity in second charge lending has never been better than it is today.
“I’m confident that August’s results will be at least doubled again before the end of year. Despite a rocky few months for the second charge sector positivity has once again returned.
“Competition between leading lenders will be the key driver which will see the second charge market double from the figures recorded in August before the end of the year.
“I expect September’s figures to show a rise in lending to around £50m with October and November breaking the £80m barrier with ease.”
Second charge loans can come with an array of benefits for lenders including being fast to arrange, increasing working capital for a business and being available to companies who have a poor credit rating.
If the terms of a second charge loan are not being met, in particular repayments, then both first charge and second charge holders have the right to force a sale of a property however it’s the first charge holder who will have the priority claim.