A growing number of Brits are turning to second charge mortgages to fund school and university fees.

According to the latest Pepper Money Specialist Lending Study, 13% of people would consider this financial option for education – a figure that soars to 23% in London.

The study highlights a shift in how Second Charge mortgages, typically used for home improvements or debt consolidation, are being considered.

EDUCATION KEY REASON

While 51% of respondents still prefer this method of borrowing for home renovations and 30% for debt management, education is now emerging as a key reason for releasing equity from their homes.

The trend is fuelled by rising costs. From January 2025, private school fees will be subject to a 20% VAT rate, adding thousands to already hefty bills. Additionally, university tuition fees are set to rise for students starting in 2025. These financial pressures are leading parents and families to explore unconventional options to secure their children’s futures.

Ryan McGrath, second charge sales director at Pepper Money, says: “From 30 October 2024, school and boarding fees for terms starting in 2025 will incur VAT.

“Combined with rising university costs, this is making education more expensive for many families.

“A Second Charge mortgage could be a smart way for parents to meet these rising costs. Traditionally used for home improvements, our research shows these loans are increasingly being considered for purposes like funding a deposit for children’s homes, business investments, or even additional properties.”

DEPOSIT HELP

While education funding may be the newest trend, the study also revealed other innovative uses for Second Charge mortgages.

One out of five (19%) of respondents would consider using one to help family members with deposits for their first homes, while 16% saw it as a viable route for buying additional properties or investing in businesses.

Paul Zammit, chief executive of The Loans Engine, says: “Second Charge mortgages are incredibly versatile, offering a quick way to help people achieve life goals.

“Rising education costs are likely to drive further growth in this area, but a lack of awareness among customers and brokers remains a barrier.

“Greater education about these options could unlock even more potential for this type of lending.”