Second mortgage lending halves

During the last year the amount of cash lent through second-charge mortgages has almost halved as the recession has reduced what lenders can offer, figures have revealed.

The Finance and Leasing Association said in January people took out £53 million through second mortgages on their homes, 84% less than in January 2008.

Homeowners mainly used the money to pay for improvements, to build extensions or for consolidating debt.

Fiona Hoyle, head of consumer finance at the FLA, said: "Second mortgage new business fell significantly in 2008 as a result of the difficulties facing companies trying to secure funding in the commercial markets. This has continued into 2009."

Lending fell in all areas by the organisation's members, and advances in January decreased by 22% in total to £4.07 billion, against the 12 months previous.

Unsecured loan lending also dropped by 35% to £344 million compared with last January and credit card advances were down 12% to £2.62 billion.

Store credit, such as loans to buy furniture and electrical goods, dropped by 26% to £381 million in January compared with the same month of 2008.

But it was the only type of lending to post an increase during the year to the end of January compared with the previous 12-month period, with advances edging ahead by 1%.