Second Charge Mortgages: The Rising Alternative in 2025's Mortgage Landscape

Market Growth Continues Into 2025

The remarkable growth trajectory of second charge mortgages that began in 2024 has continued with even stronger momentum into 2025. Following the 16% year-on-year increase reported in August 2024, the market has sustained double-digit growth rates, cementing second charges as a mainstream financing option rather than a niche product.

According to the latest data from the Finance & Leasing Association (FLA), second charge mortgage new business is now up by 18% in the first quarter of 2025 compared to the same period last year, with the total value of new loans exceeding £1.4 billion over the past 12 months.

This sustained growth reflects the product's increasing relevance in today's economic climate, where homeowners are seeking flexible ways to leverage their property equity without disturbing favorable existing mortgage arrangements.

Why Second Charges Are Gaining Traction in 2025

The popularity of second charge mortgages has been driven by several key factors unique to the current economic landscape:

1. The 'Rate Lock' Effect Continues

Many homeowners secured first charge mortgages at historically low rates before the Bank of England's rate hikes in 2022-2023. With first charge rates still higher than these legacy deals despite recent modest reductions, remortgaging remains unattractive for many. Second charge loans allow these homeowners to access additional funds without surrendering their advantageous first charge rates.

2. Renewed Focus on Home Improvements

The post-pandemic shift toward home investment has evolved rather than diminished. In 2025, homeowners are increasingly funding substantial renovations focused on energy efficiency, creating multi-functional spaces, and accommodating multi-generational living arrangements.

The latest distribution of new business by purpose shows:

• Home improvements (as sole purpose): 16.2% (up from 13.5% in August 2024)
• Home improvements combined with debt consolidation: 23.8%
• Debt consolidation only: 55.1%
• Other purposes (including business funding): 4.9%

3. Mainstream Lender Participation

The second charge market has seen increased participation from mainstream lenders in 2025, moving beyond the specialist lenders that traditionally dominated this space. This has expanded product options, increased competition, and begun to exert downward pressure on interest rates.

4. Innovation from New Market Entrants: Spotlight on Interbridge

One of the most exciting developments in the second charge market has been the emergence of innovative new lenders like Interbridge, a recent addition to Charles Frank's lending panel. Since their launch in late 2024, Interbridge has made remarkable inroads into the market, quickly establishing themselves as a formidable presence in the second charge space.

Interbridge has distinguished itself through several key innovations:

• Streamlined digital application process that has reduced average completion times to just 11 days from application to funding
• Flexible underwriting criteria that considers income sources often overlooked by traditional lenders
• Competitive rate structure that has forced established lenders to reconsider their pricing
• No early repayment charges on their flagship products, offering borrowers unprecedented flexibility

This combination of speed, flexibility, and competitive pricing has made Interbridge particularly popular for homeowners needing rapid access to funds for time-sensitive projects or investment opportunities. Their willingness to consider complex income structures has also made them a go-to option for self-employed professionals and business owners.

At Charles Frank, we've found Interbridge's proposition to be especially valuable for clients with specific needs that traditional lenders struggle to accommodate. Their presence on our panel has significantly enhanced our ability to provide tailored solutions across a wider range of client circumstances.

The Evolving Broker Fee Landscape

While second charge mortgages have become more accessible and mainstream, the issue of broker fees remains a significant consideration for consumers. However, the landscape shows signs of positive change in 2025:

Regulatory Scrutiny Intensifies

The FCA's Consumer Duty regulations, now fully embedded since their introduction in July 2023, have had a marked impact on the second charge broker fee structure. The requirement to deliver "good outcomes" and "fair value" has prompted greater scrutiny of percentage-based fee models that result in high charges.

In February 2025, the FCA published its review of the second charge market, specifically highlighting concerns about broker fees that appeared disproportionate to the service provided. While stopping short of imposing fee caps, the regulator has made clear its expectation that brokers must be able to demonstrate that their charging structure represents fair value.

Market Responds with More Competitive Fees

In response to regulatory pressure and increased competition, the average broker fee has begun to decrease from the 10-12.5% levels previously common in the market:

• Top-tier brokers now typically charge between 5-7% of the loan amount
• Some mainstream brokers have introduced fixed-fee options starting from £1,995
• A growing number are adopting hybrid models with lower percentage fees combined with minimum and maximum fee thresholds

Despite these positive developments, some brokers continue to charge fees as high as 10-12.5% of the loan amount, particularly for smaller loans or more complex cases. This wide variance in fee structures emphasizes the importance of shopping around and comparing broker services.

The Transparency Revolution

More significant than the modest reduction in average fees has been the increase in transparency around fee structures. The days of buried or poorly explained charges are increasingly behind us, with brokers now typically providing:

• Clear fee breakdowns at the initial consultation stage
• Written explanations of how fees are calculated and justified
• Comparison information showing how their fees compare to market averages
• Detailed accounts of exactly what services are covered by their fees

Conclusion

The second charge mortgage market in 2025 continues to evolve from a specialist product to a mainstream financing option. This evolution has brought welcome improvements in competition, product innovation, and increasingly, fee transparency.

However, the significant variance in broker fees remains a critical consideration for consumers. As regulatory pressure continues to build, we can expect further improvements in fee structures and transparency, but for now, careful comparison and due diligence remain essential.

At Charles Frank, we welcome these changes and remain committed to leading the way in providing fair, transparent, and value-based second charge mortgage services. We believe that putting customer interests first isn't just the right thing to do—it's the foundation of sustainable business growth in a rapidly evolving market.

This article is for information purposes only and does not constitute financial advice. For personalized advice about second charge mortgages, please contact Charles Frank to speak with one of our qualified advisors at 029 2167 0060 or specialist@cffl.co.uk