"The volatility of the last few years has seen demand for alternative and specialist lending solutions come into the mainstream."
As we head towards the end of 2024 and into a new year, it’s a good time to reflect on how the market has fared in the last 12 months and what our goals and aspirations are for the year ahead.
There’s no doubt that 2024 was a year of ups and downs for both the mortgage market and the specialist lending sector. The year started well with some significant rate cuts, leading to a surge in activity and much-needed optimism after a challenging 2023.
This quickly changed however, as rates started to rise again on the back of stubborn inflation and increased economic uncertainty. The surprise calling of a General Election in July added further fuel to an already subdued mortgage market as borrowers sat back and waited to see what a potential change in government could have on their finances and the broader UK economy.
The second half of 2024 also had its ups and downs. Chancellor Rachel Reeves’ first budget in October caused some ripples for landlords in the buy-to-let sector, with changes to the stamp duty surcharge having an immediate effect on the cost of buying a second property.
However, a cut to the base rate by the Bank of England in August signalled the tide may well be changing. This was followed by another rate cut four months later in November, which means we head into the new year in a lower rate environment with a greater degree of optimism.
Despite all these challenges, the second charge mortgage fared relatively well in 2024. Higher interest rates and challenges around affordability in the first charge mortgage market prompted borrowers to seek alternative methods to remortgaging in order to address their capital raising needs.
New entrants into the sector helped to drive up competition and further stimulate growth as improved criteria and greater flexibility on deals saw heightened demand for second charge mortgages among more mainstream borrowers.
In fact, figures from the Finance & Leasing Association (FLA) show the second charge continued to grow over the course of 2024, with new business volumes increasing by 32 per cent in October. This was before the second base rate cut was announced by the Bank of England.
This trend towards lower rates is expected to continue as we head into the new year, with forecasts predicting a further three to four base rate cuts over the course of 2025. Should these predictions prove accurate, it is likely we will round off 2025 with the base rate sitting at between 3.75% to 4% – which will help to further stimulate competition and improve affordability among borrowers.
While Norton expects demand for second charge mortgages to continue, and indeed grow, in 2025, there is no doubting the fact that increasing consumer education around second charge loans should be a priority for those working in the specialist lending market in the next year.
The volatility of the last few years has seen demand for alternative and specialist lending solutions come into the mainstream. In a reducing rate environment however, there is a risk that this momentum will diminish, so it is essential that the sector continues to work towards increasing consumer education around second charges in 2025.
Second charge mortgages are a vital capital raising tool in cases where a remortgage is not a viable solution for the customer. Educating consumers on this is crucial if we are to help drive growth in this area of the specialist lending market. This is why working with introducers and brokers to support the specialist lending market is a key objective for Norton Broker Services as we head into 2025.
Increasing commercial and bridging activity is also a priority for the business as we head into the new year and brokers looking for support, guidance or to refer business in these areas should ensure they speak to Norton about their clients’ borrowing needs in any of these specialist areas.
Broadening the scope of our business and working with more networks and partners is a key priority for Norton in the new year. Not only will this help us expand our reach and educate brokers and consumers on these niche areas of the mortgage market, it will also help us to remain a key player in the specialist lending sector.
