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Be sure to use all debt consolidation tools


“A question we frequently ask from brokers considering this route for their clients is whether a second mortgage will make it harder for their clients to remortgage in the future.”



After several months of a bank base rate just above zero, rates are on the rise. They may not increase quickly and have little immediate impact on mortgage payments for the vast majority of customers who benefit from fixed rates, but any increase will increase the cost of servicing unsecured debt and revolving credit – and it always encourages people to look for ways to manage their expenses.

In addition to rising rates, people are also facing the challenge of rising prices in stores due to inflation, and energy costs are on an upward trajectory, significantly eroding anyone’s monthly income. heats his house or uses electricity.

This rising cost of living means people are going to have a tough year this year. In fact, a recent stat published by Pepper Money as part of its Adverse Credit Report found that 81% of people with adverse credit say a £100 increase in their bills would have a significant impact on their finances.

One way to help manage monthly expenses is to pay down unsecured debt and revolving credit by increasing secured borrowing, either through a mortgage, new advance, or second mortgage. There are obviously considerations in converting unsecured debt to secured debt and potentially increasing the length of debt repayment, and debt consolidation isn’t for everyone, but under the right circumstances it can. provide a vital lifeline for borrowers, giving them greater control over their monthly finances.

The most appropriate method of secured borrowing used to consolidate debt also depends on the individual client. For those nearing the end of their current contract, a mortgage may be more appropriate. For those who are currently in the middle of a fixed rate mortgage and those who want more control over the term in which they repay debt, a second mortgage may be the most suitable solution.

A common question we get from brokers considering this route for their clients is whether a second mortgage will make it harder for their clients to remortgage in the future. In fact, the opposite is true. Mortgage affordability is based on monthly expenses, so reducing the amount spent on credit service reduces those expenses.

Also, a second mortgage is a known quantity. Customers with open revolving credit accounts have the ability to significantly increase their borrowings in the future without needing to apply for additional credit. So, by paying off those accounts and then closing them, borrowers can put themselves in a stronger position to get the right mortgage for their situation.

Debt consolidation is going to be a key theme for brokers this year. Be sure to use all the tools available to help your clients, and if you don’t have experience working with one or more of the available options, partner with an expert who can help you help your clients be the strongest financial position possible.