Second charge securitisation won’t increase broker appetite

Earlier this month Optimum completed the first second charge securitisation since the credit crunch, with a portfolio of £251m of loans.

However, industry experts say any hopes that the renewed appetite from investors may encourage more brokers to embrace the sector will prove unfounded.

“The fact that Optimum has completed this securitisation is great news for the industry and will get lenders thinking about new ways to fund their business which may lead to more innovation and new entrants,” said Steve Walker, managing director, Promise Specialist Lending. “However I don’t think this will even register with the average mortgage broker or influence their perception of second charges. For many this problem is more deep rooted in old perceptions and an unwillingness to change.”

Adele Turton, managing director of Plan A Mortgage Brokers, agreed.

“As part of our due diligence and advice processes we always research second charges as as possible alternative.  They have definitely become more mainstream with rates reducing and the process more clearly defined by the regulator. With the base rate being so low and many people on low SVR, a second charge is often as cost effective if not better than a full remortgage. Personally I think it could be down to old habits and perceptions of second charges, being too expensive, but it is changing.”

Paul McGerrigan (pictured), chief executive of Loan.co.uk, said the sale showed that confidence in responsibly originated specialist loans is returning within the capital markets and that there is a healthy appetite to extend more loans and he expects to see a further increase in lending from current lenders and may see new lenders entering the market again.

“Having said that, I don’t believe lending is currently restricting growth in the second mortgage market. There is no shortage of lending appetite,” he adds. “The restriction is more about the lack of awareness among borrowers, mortgage advisers and IFAs that second mortgages are an option that should be explored every time they embark on a capital raising exercise for a borrowing above 10,000.”

Despite the lack of impact on the broker market, the sale has been widely welcomed by the industry.

“This is fantastic news as it not only demonstrates that the Optimum model is successful but also will bring renewed confidence from the capital markets who had formerly been unwilling to accept the second charge industry in recent years,” said Steve Pollard, head of business development at Smart Money.

Marie Grundy, sales director at West One, who will be heading up the lender’s second charge business arm says it’s good to see institutional investor appetite for second charge mortgages.

“Optimum and Natwest markets. which acted as the arranger, should be proud of achieving the first securitisation in the second charge mortgage market in over a decade,” she added. “This is testament to how the sector has developed in recent years and is a positive accomplishment for all those who operate in this space.”