Secured Loan Market Looks to Be Coming of Age

Michelle Tuvey Michelle Tuvey | Loan Underwriter

A few decades ago, a second charge lender could advertise its products and services with the assumption that most consumers would understand the basics of second charge lending. That's no longer the case. In fact, the average secured loan offer has taken a beating over the last ten years. The stifling of second charge lending since the start of the financial crisis needs to change ?? and fast ??- according to industry experts.

Statistics from the Money Charity showed that private debt in the UK reached some £1.5 trillion last autumn. Furthermore, roughly 87% of the indebtedness is tied up in private mortgages. The figures demonstrate that the average adult is £30,000 in debt, with most of that debt being tied up in residential property.

It is interesting to note that separate research revealed that 79% of adults don't know what second charge lending is. Among those who are familiar with the practice, nearly a quarter don't know the difference between a second charge loan and a remortgage product.

When you combine both reports together, three things become clear:

  • Consumer debt in the UK is growing
  • Many people with debt issues aren't aware of how a secured loan can help
  • Individuals who could benefit from secured lending are not taking advantage of it.

It hasn't helped that the banking industry has not pushed second charge lending that much since the start of the recession. But with new government rules that were implemented in 2016, mortgage brokers are required to give equal attention to second charge products if they want to maintain their independent status. That is helping somewhat. The new rules and a sudden willingness among lenders to give more attention to second charge products suggest that the secured loan market may finally be coming of age.

Secured Loans for Debt Reduction

If more than three-quarters of adults are not familiar with second charge lending, they probably also don't know how valuable a secured loan for debt reduction purposes is. So that's what the consumer financial services sector is now focusing on. They are just now beginning to get the word out about secured loans for debt consolidation and addressing tracker and interest-only mortgages.

The key to making it all work is providing secured loans that customers actually want. It's not enough to teach them about the second charge market; they should be made to understand that taking out a secured loan is a better financial decision in the long run. They need to know how secured lending reduces the total amount of money they pay to service their debt.

As banks start competing for the average secured loan customer, it's up to organisations like ours to educate people on the benefits of this kind of financing. We expect informational websites, loan brokers, financial advisers, and others with a vested interest to start giving their clients more second charge information and advice.

In the simplest terms possible, a secured loan is a loan obtained using the equity in your property as collateral. Secured loans are somewhat easier to get for this reason. Anyone with decent credit and enough equity to qualify can borrow tens of thousands of pounds to pay off more costly credit card and personal loan debts. As long as terms are kept in check, the average debtor will reduce the overall amount he or she spends over time by paying off higher interest debt with a secured loan.

Is the second charge market finally coming of age? It appears that way, but time will truly tell.


  1. Loan Talk ??
  2. Financial Reporter ??

Instantly compare 950+ of the UK's best secured loans

Rates from as low as 3.75%