Jannels said he had heard brokers feed back that they were concerned that the alignment of second charge mortgages with first charge deals would mean they had to compete for business as the fee structure changed.
Fees charged by advisers on second charge deals are often higher than those associated with first charge deals, as brokers are not allowed to collect a fee until the mortgage completes, meaning they have to account for customers dropping out of cases.
Jannels said: “Most of the seconds brokers are pretty worried that volumes are going to drop while they’re still embedding into the [MCD] process. At the moment second charge brokers get quite nice big fees and it’s going to be a little bit tense for a while as everyone gets used to dealing with seconds. The competition in the fee structure is also going to be pretty tight as they come under first charge regulation.”
Jannels said he did not expect a wave of first charge brokers to start advising on second charge deals after 21 March. A number of networks have opted to refer these cases to a master broker, rather than offering the option to advise on second charge deals.
“I don’t think brokers have got the expertise to know which lender is going to take someone who can only show a £20,000 income, but at the same time they’ve put £110,000 into their pension this year. The specialist market is huge and it takes a number of years to get used to that and know where to look.”
An online poll conducted by Mortgage Solutions showed that the majority of brokers see less than 10% of specialist deals contributing to their business volumes. A further 13% said these cases made up less than half of their business, while 31% stated that such deals were in the majority.
Rob McCoy senior products manager at Sesame Bankhall said the changing regulatory environment was prompting the group’s network to look at specialist lending in closer detail.
He explained that it was exploring the potential to make new additions to its lender panel as well as reviewing what its existing suppliers offer to members.
“The market is moving and you’ve always got to look at whether your proposition is fit for purpose,” McCoy said.
