Where the market stands for adverse-credit borrowers right now, and how to fold existing debt into a remortgage or second charge.
Missed a few payments? Got a default or a CCJ on your file? Heading into the back half of 2026, the picture is calmer than it has looked in years. Arrears have come down, lenders want the business, and there are more ways for people with patchy credit to sort out their finances than there have been in a long time. What has really shifted, though, is how borrowers deal with the debt they have already run up. More and more are turning to a remortgage, or a second charge mortgage, to pull it into one place. Here is where things stand for adverse-credit borrowers this year, and how debt consolidation actually works when your credit file has a few marks on it.
The 2026 picture: how are adverse-credit borrowers doing?
Start with the numbers, because they tell a better story than the last couple of years of headlines. UK Finance counted 79,110 homeowner mortgages in arrears in the first quarter of 2026. That is 2% fewer than the quarter before, and the lowest the figure has been for three years. On the buy-to-let side the drop was steeper still, down 24% on the same point last year. Repossessions stayed rare, and UK Finance makes the point that most of them, more than two in three, involved mortgages taken out at least a decade ago.
None of that means people feel comfortable. UK Finance itself describes the backdrop as fragile, and the Bank of England held base rate at 3.75% for most of the year before raising it to 4.00% on 5 November. With rates now moving up rather than down, waiting for rates to rescue the monthly budget is not much of a plan. So a lot of borrowers are simply getting on and reorganising what they owe.
Why so many people are consolidating debt in 2026
You can see it most clearly in second charge lending, which has taken off. The Finance & Leasing Association put second charge lending at £625m for the first quarter of 2026, a third higher than a year earlier, across 11,489 new agreements. Over the full year to March, borrowers took out £2.3bn of it. The sector has not been this busy in roughly 18 years, and the reason lenders and packagers keep giving is the same one: people are clearing other debts.
Why now? Plenty of homeowners locked in a cheap mortgage rate a few years back and have no intention of giving it up. Folding credit cards, personal loans and car finance into a single secured payment can bring the monthly total down and swap a handful of higher-rate bills for one you can actually plan around. For someone whose credit has started to slip, it can be a way to steady things before they get worse. The catch is in the detail. Turning unsecured debt into debt secured on your home is not a decision to take lightly, and it only works with the right structure behind it.
Remortgage or second charge? The two routes to consolidate
There are really two ways to raise money against your property to clear other debts, and which one suits you comes down mostly to the rate you are already paying.
Remortgaging means replacing your current mortgage with a bigger one and using the extra to pay off what you owe elsewhere. If your existing deal is ending anyway, or it is no cheaper than what is on offer now, this is often the tidiest option. The problem comes when you are sitting on a low fixed rate. Remortgage the whole balance and you lose that rate across all of your borrowing, and the extra interest on the lot can easily swallow whatever the consolidation saved.
A second charge works differently. It sits behind your existing mortgage as a separate loan, so the original deal, and its rate, carries on untouched. You pay the second charge rate on the new money only, not on everything. That is the whole appeal, and it is why second charge lending has jumped this year: you get to consolidate without handing back a cheap first-charge rate. Second charge lenders also tend to be more relaxed about adverse credit than a high street remortgage, because difficult cases are what they handle all day.
Can you remortgage to consolidate debt with bad credit?
Yes. Bad credit does not shut the door, though it does shrink the number of lenders who will say yes. The high street runs everything through automated scoring, and a recent default, a CCJ or a run of missed payments will often get a remortgage turned down flat. Specialist lenders work another way. They want the context: when the problem happened, whether it has been settled, what caused it, and how things look for you now. A default from three years ago that has since been cleared sits in a completely different place to a payment you missed last month.
Two things carry as much weight as the credit history itself. One is how much equity you hold. The other is whether you can afford the new payment. More equity, meaning a lower loan-to-value, gives the lender a bigger safety margin and opens up more of the market. And because consolidating adds to what is secured on the property, the lender has to be sure the larger payment is one you can genuinely keep up. Before you apply, it is worth working out how much you can borrow and taking an honest look at your affordability.
When a second charge makes more sense
Three situations usually point towards a second charge. The first is when you are tied to a low fixed rate you would be mad to give up. The second is when your current lender simply will not lend you any more. The third is when recent credit trouble means a full remortgage would either be declined or come at a punishing rate. Because the second charge only touches the new borrowing, the sums often beat remortgaging the whole balance onto a higher rate, even though the second charge rate on its own looks dearer than a standard first-charge deal.
What you are trading off is that you will be running two secured loans against the home at once, and the debt usually gets stretched over a longer period than the original loans or cards would have been. Your monthly cost drops, but left alone the total can climb, so overpaying where the deal lets you is worth doing. Weighing that up is exactly where a broker earns their keep. Our page on the true cost of a mortgage shows how stretching the term changes the maths.
What lenders look at
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- The credit issue itself – a default, CCJ, missed payment, IVA, debt management plan or bankruptcy each get handled differently, and how recent it is counts for more than what it is called.
- Loan-to-value – the more equity behind the loan, the more lenders in play and the sharper the pricing; pile on a lot of consolidation at a high LTV and the options thin out fast.
- Whether the new payment is affordable – the lender has to see that the bigger secured payment fits your income and what you already owe.
- Whether it actually helps – a decent lender, and a decent broker, will only go ahead if you come out better off, not just staring at a smaller monthly number.
How a broker helps
Getting this right, remortgage or second charge, and finding the lender who will approve you rather than the one who will not, mostly comes down to knowing the market. We are whole-of-market, so we place adverse-credit cases with the specialist lenders who look at the person and not just the score. We will run both routes side by side so you can see what each really costs before you commit to either. If a straightforward bad credit mortgage is the smarter move, we will say so. If a second charge lets you hang on to a cheap rate, we will put the numbers in front of you. The aim does not change: you finishing up better off than you started.
Frequently Asked Questions
Can I consolidate debt with a mortgage if I have bad credit?
In most cases yes, though it usually means a specialist lender rather than the high street. Bad credit narrows your choices, it does not remove them. A specialist looks at what went wrong and when, alongside where your finances sit today, instead of rejecting you on a score alone.
Is a remortgage or a second charge better for debt consolidation?
That hinges on the rate you are already on. Sitting on a low fixed rate? A second charge lets you consolidate and keep it. Coming off your deal, or paying over the odds already? A full remortgage might work out cheaper.
Will consolidating debts into my mortgage lower my monthly payments?
Most of the time it will, but there is a trade-off. Spreading a short-term debt across a much longer mortgage term cuts the monthly figure while adding to what you pay in total, unless you overpay when your deal allows it.
How recent can a default or CCJ be and still get a mortgage?
There is no fixed cut-off; timing and circumstances do the talking. A default from a few years back that you have since settled reads very differently to a payment missed last month. Every specialist lender draws the line in its own place.
Does a second charge affect my existing mortgage?
No, your first mortgage carries on exactly as it is, rate and all. The second charge is a separate loan that sits behind it, so you keep your current deal and pay the new rate on the extra you borrow only.
How much equity do I need to consolidate debt against my home?
The more, the better. A lower loan-to-value gives the lender more comfort, brings more lenders into play and earns you a sharper rate. Try to consolidate a large sum at a high LTV and it gets harder to place.
Are second charge mortgages regulated?
Regulated ones fall squarely under FCA rules. They come with the same protections as a first-charge residential mortgage, advice and affordability checks included.
Should I get advice before consolidating debt into my home?
Yes – moving debt that was unsecured onto your home is a big step. A broker can line up the remortgage and second charge routes against each other, sanity-check that you will actually be better off, and get the case to the right lender.
Think carefully before securing other debts against your home. Consolidating debts into a mortgage or second charge may reduce your monthly payments but can increase the total amount you repay over the term. Your home may be repossessed if you do not keep up repayments on a mortgage or any other debt secured on it.
Speak to a bad credit and debt consolidation specialist
If you are weighing up whether to remortgage or take a second charge to consolidate debt, contact us today and we will talk you through both routes, your likely rate and loan-to-value, and how best to structure the application before anything is submitted.
UK Mortgage Broker is a whole-of-market broker helping clients throughout the UK and globally to secure funding on UK property. We are directly authorised and regulated by the Financial Conduct Authority.
Your home may be repossessed if you do not keep up repayments on your mortgage.
Call: +44 1628 969 500 Email: info@uk-mortgagebroker.co.uk
Related Pages
- Bad Credit Mortgages UK – how adverse-credit borrowing works and the lenders who assess risk properly.
- Second Charge Mortgages – borrowing behind your existing mortgage without disturbing its rate.
- Remortgage UK – replacing your existing mortgage, including raising money to consolidate debt.
- The True Cost of a Mortgage – how term length and fees change what borrowing really costs.
- Case study: first-time buyers with adverse credit – a real example of placing a bad-credit case.