Second Charge Mortgages: Unlocking Opportunity Where Traditional Lending Falls Short

In today’s mortgage market, rates are higher than they were five years ago, yet many borrowers remain on previously available low rates. Early repayment charges (ERCs) constrain flexibility, while tighter lending criteria limit access to additional borrowing. In this environment, second charge mortgages are a highly valuable yet often overlooked solution. Despite their growing popularity, they are still sometimes perceived as a product for sub-prime clients, a perception that no longer reflects reality.

Why second charges are relevant now

Many homeowners are locked into first charge deals that offer attractive rates but come with ERCs, making remortgaging an unwise and costly option. At the same time, tighter lending criteria and restrictions on borrowing capacity mean that equity-rich homeowners often struggle to access additional funds. This combination has created a gap in the market where second charge mortgages can provide a flexible and cost effective alternative.

The FLA’s most recent data underscores this trend. In 2025, second charge new business volumes and values have continued to grow robustly:

January 2025: volumes +24%, value £146m

May 2025: volumes +11%, value £160m

June 2025: volumes +16%, value £177m

July 2025: volumes +15%, value £201m

August 2025: volumes +10%, 12-month value £1.937 billion (+23%)

These figures demonstrate sustained double-digit growth, highlighting that second charges are not just relevant but increasingly mainstream.

Dispelling the sub-prime myth

Contrary to common misconception, the majority of second charge borrowers are prime, high-street clients with good credit who simply cannot access additional borrowing via their existing lender. They may be constrained by low first-charge rates, ERCs, or lending caps and affordability rules, not by poor creditworthiness.

Second charges offer these homeowners access to funds without disturbing a first charge mortgage, making them an ideal solution for home improvements and renovations, consolidating debts of any kind, funding major life events, such as weddings, education, or family support and strategic borrowing for investment opportunities.

Opportunity for brokers

For brokers, second charge mortgages represent a growing opportunity to support clients whose needs cannot be met through first charge products alone. By understanding the flexibility, affordability, and strategic advantages of second charges, advisers can position themselves as trusted partners in helping clients achieve their financial objectives. From unlocking home equity to funding life stage goals, while remaining compliant and focused on suitability.

Second charge mortgages have evolved far beyond their historical perception as a sub-prime solution. With robust 2025 growth in both volume and value, they are now a mainstream tool for prime borrowers navigating today’s restrictive lending environment. Brokers who recognise this trend and embrace the product’s versatility can significantly expand the range of clients they are able to serve.

For adviser use only. Please note this content has been supplied by our lender partner and as such, is their responsibility. No party shall have any right of action against Legal & General in relation to the accuracy or completeness of the information in this article.