The secured loan market has gone from strength to strength over the last two years – as annual lending to January 2015 has increased by 28% from the year before (£609m) to stand at £779m.
According to the first ever Enterprise Finance Secured index there were 1,294 transactions in January worth £66m, a 2% increase on December 2014 and an 11% increase on January 2014.
Harry Landy, director of Enterprise Finance, said: “Lending of £66m in January shows that the secured loan market got off to a steady start in 2015 with a 2% month-on-month improvement.
“This is slightly more modest than the uptick we usually witness at the start of the year, but the usual seasonal slowdown in activity from November to December didn’t materialise at the end of 2014 which made a more significant jump unlikely.
“Nevertheless, the year-to-date lending figure of £779m proves this is definitely still a market heading in the right direction as more homeowners wake up to the usefulness and versatility of second charge mortgages.”
The average secured loan borrower takes out £54,000 at around 61% LTV, while typical loans sit behind a first charge worth £234,000.
Nearly half (47%) of borrowers take out loans to make home improvements, while debt consolidation is the second most popular reason.
Landy added: “Potential landlords are also using secured loans to purchase investment properties and with many high street banks still reluctant to lend to small businesses we are even seeing people use secured loans to help fund their own personal ventures.
“As the reputation of the sector continues to improve and regulation of second charge mortgages becomes increasingly stringent, then homeowners can feel increasingly comfortable about taking out the products.
“The average LTV ratios, loan sizes and first charges the secured loans are sitting behind shows that lender and brokers – not to mention borrowers themselves – are adopting a sensible approach to consumer credit and not allowing individuals to overstretch themselves.”