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Borrowers using side fees for purposes other than debt consolidation



“The number of primary customers who use them just for this purpose has increased from 59% to 43%, while the use of home improvement has increased. “

According to the latest data from Evolution Money, more second-load borrowers are using their loan proceeds for purposes other than debt consolidation.

Evolution’s quarterly data tracker analyzes data from two different types of its second mortgage products, split between borrowers using loans for debt consolidation purposes and clients with prime credit scores.

The latest version of the tracker shows a more uniform picture in terms of volume and value of second charge loans taken out by both types of borrowers.

Looking at its total loan data for the three months to the end of May 2021, the product divided by mortgage volume is 74% debt consolidation versus 26% premium, and in value 64% debt consolidation. / 36% premium.

For borrowers who specifically use a second mortgage for debt consolidation purposes, the average loan amount is now close to £ 21.3,000, with an average term of 125 months and an average LTV falling to 72.4 %. Borrowers, on average, continued to consolidate five specific debts, but the average value of consolidated debts fell below £ 14,400.

Over the past three months, data from Evolution shows that the most common uses of a second mortgage for debt consolidation have remained unchanged from the previous iteration of the Tracker.

These were: paying a loan provider (49% – the same level as the previous tracker); pay a bank (27%, compared to 37%); repay the retail loan (17%, compared to 8%); and to repay car financing (3%, compared to 5%). Borrowers have also used their second mortgages to pay debt collectors, first mortgages, and utility providers.

For blue chip borrowers, the average loan size is now £ 33.6,000, up from £ 35.7,000 with an average term of 157 months, up from 166, and an average LTV dropping from 77.4% to under by 70%.

Major borrowers typically take over these second mortgages for debt consolidation, but that number is down from 59% to 43%. Conversely, home improvement work now represents 23% of loans, against 9% three months ago.

Steve Brilus, CEO of Evolution Money, commented: “Our second iteration of the Evolution Money Second Charge mortgage tracker shows some similarities to the first, but also a number of deviations, particularly with respect to primary borrowers and the likelihood that they will use the proceeds of their loans to other purposes than debt consolidation. .

“There is no doubt that the vast majority of debt consolidation and blue chip borrowers use seconds to pay off debts from various sources, but the number of primary clients using them just for this purpose has increased from 59% to 43%, while home improvement usage has increased.

“Given the nature of the first load market today, with huge volumes to be completed before the end of the stamp duty waivers, it is perhaps no wonder that many customers are not willing to invest in ‘bun fight’, especially those who want to keep competitive first mortgages, who cannot or cannot remortgage, but still see the opportunity to use their existing equity to fund improvements domiciliary.

“Securing a first mortgage loan in this situation, with many lenders and transport agents stretched beyond their capabilities due to the enormous demand they face, is difficult, and given that we – in As a second mortgage lender – can provide the funds needed in a matter of days, it’s no wonder that many advisors are looking at the second charge options available. We feel that the demand for these sources will continue to grow.

“As is the use of a second mortgage by borrowers who specifically wish to repay their debts. For our debt consolidation clients, we have seen more people looking to pay off retail credit, while the number of bank debt and auto finance has declined, although the number of paying loan providers remains at exactly the same levels. .

“It is understandable that the release of the foreclosure has left many homeowners with more debt now than when they entered it. However, with a greater degree of stability and certainty, especially when it comes to employment, they are turning to counselors to help them pay off those debts and the seconds are increasingly coming on the radar. “



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