January 2016 saw secured lending reach a five-year high, according to the latest Enterprise Finance Secured Loan Index.

The firm said the total, £105.8m in transactions, represents a 7% increase in monthly lending on December 2015.

Second charge finance has recovered from November’s 12% dip in lending, overtaking the £98.5m record set in October. Secured lending grew by £6.7m in January, up from £99m in December.

Secured lending rose 59% year-on-year in January, beating the 32% growth in monthly remortgage lending over the same period. However, monthly secured lending is still significantly smaller than the £5.8bn of monthly remortgage lending.

January’s increase means that annual second charge lending has broken through the £1bn barrier, with £1.03bn lent over the last 12 months. The upswing in total annual lending represents a 31% increase since January 2015. Annual secured lending rose from £993m in December to establish this new benchmark.

Harry Landy, sales director of Enterprise Finance, said: “January was a momentous month for the second charge market. Finally breaking through the £1bn barrier is evidence of the growing stature of the sector and the increased consumer interest. The huge upswing in lending in January was a positive sign in the run up to MCD implementation, giving lenders and borrowers alike increased confidence.

“Brokers are now using second charge lending as an alternative to remortgage products, with both markets expanding rapidly. The increased competition between the two types of finance will only benefit consumers, giving them additional choice when raising capital.

“There are many cases where second charge finance may better suited for clients when compared to remortgaging. These scenarios include – but aren’t limited to – consumers with interest-only mortgages, those with low standard variable rates on their first charges, or self-employed borrowers who are struggling to access the finance they need through other means. Intermediaries have increasingly opted for second charge products when serving these types of clients due to the reassurance available from specialist finance experts who are qualified to provide large volumes of specialist finance with quick case approvals.

“Another driver of the current growth in secured lending is the demand for debt consolidation. The Bank of England has reported that consumer credit rose by 9.1% in January, the largest rise in unsecured borrowing since 2006. Consumers are turning to second charge finance, as they seek to consolidate their various sources of personal debt. By obtaining a secured loan against their property, lenders will be able to offer lower interest rates compared to other forms of borrowing.

“The uptick in consumer borrowing for home improvement has also boosted the development of second charge lending. With house prices rising 7.9% year-on-year in January according to the ONS, many are now taking the opportunity to borrow against their property to fund renovation in order to further boost their home’s value.”them additional choice when raising capital.

“There are many cases where second charge finance may better suited for clients when compared to remortgaging. These scenarios include – but aren’t limited to – consumers with interest-only mortgages, those with low standard variable rates on their first charges, or self-employed borrowers who are struggling to access the finance they need through other means. Intermediaries have increasingly opted for second charge products when serving these types of clients due to the reassurance available from specialist finance experts who are qualified to provide large volumes of specialist finance with quick case approvals.

“Another driver of the current growth in secured lending is the demand for debt consolidation. The Bank of England has reported that consumer credit rose by 9.1% in January, the largest rise in unsecured borrowing since 2006. Consumers are turning to second charge finance, as they seek to consolidate their various sources of personal debt. By obtaining a secured loan against their property, lenders will be able to offer lower interest rates compared to other forms of borrowing.

“The uptick in consumer borrowing for home improvement has also boosted the development of second charge lending. With house prices rising 7.9% year-on-year in January according to the ONS, many are now taking the opportunity to borrow against their property to fund renovation in order to further boost their home’s value.”