Second charge rates cheaper?

We talk quite a lot about how second charge can be the more cost effective solutions for a number of borrowers. However, by this we usually mean taking into account all circumstances the overall cost of the loan is cheaper. What we’re starting to see now however is second charge rates actually falling lower than their comparable first charge rates.

Ignoring for a second the debate over whether second charge rates have fallen too far I’d like to issue a request to brokers. Not a challenge per se, but rather an experiment.

Taking the two scenarios below I’d like to see how brokers would tackle the case with a first charge product. I’d be genuinely interested to find out.

Key Criteria & Application Guidance

So. scenario one. A borrower has missed three mortgage payments 12 to 19 months ago and has been paying extra each month to bring the mortgage up to date, which he eventually did three months ago. He now needs to raise £50,000 in capital at 65% LTV with good affordability. The best second charge rate for this scenario is 3.83%. Could a first charge beat this?

Or how about this one – a borrower had a £4,500 CCJ in October 2016 and a £750 CCJ in January 2017. Both have now cleared and his equity levels and affordability are good. In this case the best second charge rate available is 3.9% – how does this compare with a first mortgage?

I think a lot more brokers would see the benefits of second charge products if they actually took the time to make the comparisons and do the figures. So if you think you can beat the rates above with a first charge please get in touch, if not, perhaps it’s time to start looking at what’s available in the second’s market for your clients?

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