Second charges – will you pass the test? Promise Specialist Finance

by: Steve Walker, managing director, Promise Specialist Finance
  • 02/02/2017
  • 0
Second charges – will you pass the test? Promise Specialist Finance
There are a few things we can expect this year. The housing crisis will continue. Buy to let will get a whole lot harder. And the FCA will conduct a thematic review of second charge lending.

We don’t know when this will happen but there is an expectation it will start in the first half of the year. This will be the first big test for mortgage brokers and second charge specialists.

Second charge brokers have faced enormous change, but the whole industry, lenders and brokers alike, came together to consider the impacts and plan a totally new way of working. Consequently everyone knew what was required so, in most cases, any gaps are likely to be in the detailed interpretation and implementation rather than the major changes regulations required.

For mortgage brokers, however, the inclusion of second charges in the mortgage regime was more of an evolution than a revolution and 12 months on you have to wonder if it by-passed some of the mortgage intermediary sector altogether. Considering second charges for any capital raising clients should be second nature. Those wishing to call themselves ‘independent’ should now be adept at advising and recommending secured loans. Others may prefer a referral process using a loan master broker. Either way the process should contain consistent disclosure and delivery of the services being offered, all fully documented to evidence what has been done and why.

We know that, for many consumers, a secured loan will be a better solution than a remortgage where it is mathematically preferable to retain the existing mortgage. With rates starting from as low as 3.83% and many of your clients no doubt tied into a very good mortgage rate at present – and fixed rate mortgages set to rise in the not too distant future – keeping hold of that current mortgage rate makes sense. Second charge loans will allow your client to do just that.

We also know that a second charge can often be a suitable alternative where borrowers don’t meet standard first charge criteria. So it follows that, if brokers are considering second charges as consistently as one might expect, the industry volumes would soar.

Yet industry figures suggest brokers, in the main, are still not on board. Independent studies state second charge lending is falling and that over three quarters of consumers still don’t know what a second charge is.

Consider if your business needs to do more to get a clean bill of health in any forthcoming regulatory reviews. Seconds can make sense for your clients and the workload shouldn’t be an issue as referring a client to a master broker is easy. Advising and working with a packager is straightforward and the advice/suitability process does not differ greatly from the first mortgage process. And if you still don’t feel you understand seconds enough there are plenty of master brokers to help you.

I suppose my point regarding second charge loans is this – if you don’t consistently disclose what you do, do what you disclose, and treat your clients fairly and consistently, be prepared to explain why not. The old days of offering a secured loan on an inconsistent or ad hoc basis are gone.

There are 0 Comment(s)

You may also be interested in

Bridging

Keep up-to-date with all the breaking bridging and short-term lending news and analysis, from regulatory changes to product innovation and inside market knowledge. Take a look at our broker and lender case studies showing short-term finance in practice.

Commercial

Find all the news, opinion and analysis for property finance brokers specialising in commercial and semi-commercial mortgages, alternative and development finance for commercial investments in residential projects.

Second charge

Stay up-to-date with the latest news, analysis and opinion on the secured loan market as it evolves into a mainstream finance option following European regulation on 21 March 2016.

Complex buy-to-let

Whether it’s a complicated asset or a complex customer, you’ll find out all the breaking buy-to-let news in this section. From limited companies to portfolio landlords, student lets to a House in Multiple Occupation, we’ve got all bases covered with our up-to-the-minute news, analysis and opinion.

Mortgage Solutions

Find all the breaking news, analysis and industry comment on Specialist Lending Solutions' sister site, Mortgage Solutions
Read previous post:
Versatility brand Mansfield PDF front cover
Exclusive: Mansfield Building Society to launch Versatility specialist mortgage brand

The Mansfield is readying to launch Versatility – the brand given to its range of specialist lending products, including self-employed,...

Close