Increasing lending volumes and reducing repossessions are the most tangible markers of 2015. Even with some optimistic predictions of the magic £1bn of second charge lending being reached before year end, the market is in rude health.
By juxtaposing new business numbers with activity on repossessions, a balanced picture emerges of an industry not only building up business but also managing its existing client book particularly well. The number of second charge mortgage repossessions among Finance and Leasing Association members was 55 in quarter three this year, down 49% on the same quarter in 2014 and the downward trend has been pretty consistent since 2009.
But let’s talk about the elephant in the room. 2015 has been about preparing for the Mortgage Credit Directive (MCD). Having received the final rules for transition to MCOB in March and April we have, as an industry, had less than a year to make the biggest changes to our regulatory framework since the 1974 Consumer Credit Act. However, our industry has never been afraid of a challenge and I am confident that lenders, master brokers and distributors will be ready.
My concern is that going into 2016, we still have no clear indication of how the bulk of mortgage intermediaries are going to respond to the pending changes in April. Faced with having to describe the service they offer as ‘restricted’, unless they incorporate a second charge element into their service offering, there is definitely going to be a strong incentive to embrace the sector.
Volume predictions for next year are always going to be a stab in the dark, because of the added variables caused by the MCD implementation. But I believe that a figure north of £1bn is certainly not too ambitious. What I think we will see are more new brokers, fewer smaller master brokers and distributors, changes to early repayment charges and a wider range of products for second charges. As first and second charges come under the same rulebook, a greater degree of convergence is inevitable.
To hear more about second charge product innovation read Loan.co.uk CEO Paul McGerrigan’s article on what to expect in 2016.