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Second charge industry no longer ‘domain of specialist lenders’

  • 19/06/2015
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The Mortgage Credit Directive (MCD) is likely to prompt a swath of new lenders to the market which will lead to lower rates for customers, industry commentators have said.

Ian Scarrott, underwriting manager at TFC Homeloans, said the new rules were likely to lead to ‘fierce’ competition within the sector.

“The second charge market is no longer solely the realm of specialist lenders. Following the changes in regulation in March 2016, we are likely to see deposit-taking banks and building societies fiercely competing in this sector. This can only mean that rates will be driven down and the consumer will ultimately be the biggest beneficiary.”

But Alan Cleary, managing director, Precise Mortgages, said while currently competitive rates at around 5% were likely to continue to fall, he expected the market to contract rather than see a surge of new entrants.

“Second charge rates are very competitive now and I see this continuing post MCD. However, the market is likely to get smaller immediately after the new regulations come into force and some lenders may choose not to continue which may push pricing upwards.”

From 21 March 2016, MCD rules will require all firms selling first and second charge loans to affordability check new remortgage customers, even if they are borrowing the same amount again.

Advisers will also be obliged to ensure customers looking to refinance their home are aware that second charge mortgages are an option available to them.

Bradley Moore, Brightstar director of second charge loans, said: “Under the MCD we are likely to see new entrants to the market as second charges begin to be offered more widely. This will drive competition and ultimately drive down the rates that are being offered, which is great news for consumers.”

According to a Mortgage Solutions poll, almost half (47%) of respondents believe that second charge mortgage rates will fall following the implementation of the MCD. A third (33%) said they will stay the same and 20% expected rates to drop.

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