The second charge market is growing again, and business owners are driving part of it
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Second charge mortgage new business volumes grew by 9% in June 2026 against the same month a year earlier, according to Finance & Leasing Association figures. That follows a 1% fall in May and a 21% jump in April, so the trend line is choppy rather than smooth. The direction of travel over the past year is still upward.
Brokers working with owner-managed businesses will recognise part of what sits behind those numbers. A director who fixed a residential mortgage at 1.8% in 2021 and now needs £120,000 to fund an acquisition, a fit-out or a VAT bill faces an uncomfortable choice. Remortgaging the whole balance at today’s rates costs far more than the money being raised is worth.
The arithmetic that sends borrowers to a second charge
Take a homeowner with a £340,000 balance fixed at 1.8% with three years left to run. Moving that debt onto a 4.6% product adds roughly £9,500 a year in interest before they have borrowed a penny of new money. Add an early repayment charge of 2% and the cost of raising capital that way climbs past £16,000 in year one.
A second charge leaves the first mortgage untouched. The borrower keeps the cheap rate on the bulk of the debt and pays a higher rate on the smaller new balance only. ABC Finance, an FCA-regulated commercial finance broker operating since 2000, publishes indicative pricing for second charge mortgages showing clean credit cases at up to 60% loan to value in the 5.0% to 6.5% range on a fix, rising to 7.0% to 9.0% in the 76% to 85% band. Adverse credit at the top of that range starts at 11%.
Run the same £120,000 raise on a second charge at 6.2%. The interest cost lands near £7,400 a year and the first mortgage carries on as before. The comparison is not close.
Where the product fits, and where it does not
Loan sizes typically run from £10,000 to £500,000, over terms of five to twenty five years, with combined loan to value usually capped at 85% and the sharper pricing sitting below 75%. Most lenders want the balance repaid before the borrower turns 75 or 80.
That shape suits a defined, one-off capital need. It suits business owners poorly when the requirement is working capital that ebbs and flows, where invoice finance or an overdraft facility does the job without securing a home against it.
Purpose matters for another reason. A second charge on the borrower’s own residence is regulated by the FCA and comes with full affordability testing under MCOB rules. A second charge secured on a buy-to-let property sits outside that perimeter. Brokers who treat the two as interchangeable create problems for themselves at the compliance review.
The step that delays cases
Every second charge needs a deed of consent from the first lender, formally subordinating the new charge. Some lenders turn this round in days. Others take weeks and treat it as a low priority piece of administration.
Where a client has a completion deadline, raise the consent request at the start rather than once the offer is issued. Cases that slip usually slip here, not at underwriting.
Fee structures deserve the same early attention. Broker fees in this market are commonly charged as a percentage of the loan, and on a £400,000 raise an uncapped percentage fee turns into a substantial sum. Some brokers cap it. ABC Finance, for instance, publishes a 5.5% broker fee capped at £2,195. Clients notice the cap when the loan is large and rarely ask about it when the loan is small, which is the wrong way round.
What the growth figures do not show
The FLA publishes volumes, not motives. Nothing in the data separates a director raising capital for the business from a homeowner consolidating credit card debt, and the two behave differently through a downturn.
Anecdotally, trade coverage of the June release points at consolidation and home improvement as the volume drivers, with business purpose lending a smaller share. That fits the pattern of the past two years. It also means the growth is more sensitive to consumer credit conditions than to SME confidence.
Watch the Bank Rate path for the next signal. Second charge pricing tracks it closely, and the gap between a legacy first mortgage rate and a current one is the single thing keeping most of these borrowers away from a full remortgage. Narrow that gap and a chunk of the second charge market goes back to remortgaging instead.
For now the gap is wide, the product does something a remortgage cannot, and volumes reflect it. Brokers who have written this product off as a niche consumer line are looking at last decade’s market.