More than 42,000 households could be poised to take out homeowner loans this year, according to analysis of market statistics and housing market forecasts by Pepper Money, the specialist mortgage lender.
Approvals for second charge mortgages, or homeowner loans, were up 17% year-on-year during the first 11 months of 2024, according to analysis of official data from the Finance and Leasing Association.
Recent months have witnessed even stronger growth rates, with the volume of new loans up 27% annually in September and 32% in October.
A continuation of the overall 17% annual growth trajectory into 2025 would mean more than 42,000 households taking out homeowner loans this year.
This scenario would mean the market would have grown by almost two fifths (39%) in total over the course of two years, from a point where there were 30,466 new second charge mortgages approved in 2023.
Higher frequency of homeowner loans on the horizon
Pepper Money’s analysis of residential property market forecasts for 2025 points to expectations of 1.13m housing transactions this year, based on the combined expectations of Rightmove, CBRE, Savills, Zoopla and Knight Frank.
That would mean one new homeowner loan being approved for every 27 housing transactions anticipated during 2025. Homeowner loans – also known as second charge mortgages – allow households to stay put and access their property wealth for reasons including making home improvements or consolidating debt.
This would represent a significant uptick in the frequency of homeowner loans: for comparison, there was one new homeowner loan approved for every 34 housing transactions in 2023.
Refined valuations to stand out in a growing competitive market
Pepper Money expects the market to see healthy competition in 2025 with particular focus on:
- Added value for valuations: ensuring valuations are as accurate and efficient as possible, including integrating more sophisticated automated valuation models (AVMs) and data from industry partners.
- Flexible product criteria to meet diverse customer needs: lending criteria’s are likely to become more flexible and tailored to a wider range of borrowers’ circumstances. For example, Pepper Money recently broadened its offer for self-employed borrowers and saw a strong performance in the closing months of 2024 as a result.
- Technology to enhance efficiency and customer experience: in a sector where speed is often the name of the game, technology will continue to streamline the lending process, accelerating processing times and enhancing accuracy. Improvements to the overall customer experience will make it easier for brokers and borrowers to navigate the mortgage landscape.
Sharing his perspective on market prospects for 2025, Ryan McGrath, Director of Second Charge Mortgages at Pepper Money, comments:
“There are very few markets where a prospective 39% increase over two years still looks like a drop in the ocean compared to its overall potential. Homeowner loans have been the mortgage market’s best kept secret for too long. As an industry, we have a significant opportunity to help more customers realise what they’ve been missing and put their property wealth to smart use to improve their finances.
“At Pepper Money, we will continue to invest in smarter systems and innovate with flexible lending criteria to build on the momentum we saw in 2024. Our service-focused culture and quicker processing times have made us the preferred choice for borrowers and brokers alike. Combine these developments with a Government pushing for homeowner expansion, and it’s safe to say the secured loan market is on track to charge full steam ahead.”
