In a surprise move, Shawbrook Bank is offering homeowners a secured loan of up to 95% loan-to-value. The new product is the first 95% LTV loan in the second charge market for some time.
Secured loans are loans where the borrower provides an asset (in this case her property) as collateral. If the borrower is unable to repay, then the lender may take possession of the property.
If a property is already mortgaged, a loan secured against it is known as second charge. What is brave about Shawbrook’s new offering is that a lot of first charge lenders (loans secured against a property that is owned outright) have still not ventured into this market yet.
95% loan-to-value is high for a secured loan. It means that the borrower must have equity amounting to only 5% to the loan’s 95%. The Shawbrook loans are designed for employed homeowners and range from £3,000 to £25,000.
A loan at 95% LTV could be a turning point for the secured loans industry.