Despite a number of national news articles of late citing exponential growth in the second charge market – many of those operating on the front line say they’re seeing a different picture.
“The market isn’t growing and if it is it is glacial at best,” said Martin Stewart, founder and director of London Money. “Education is paramount and we are doing our bit to try and make the broker best understand where a second charge fits in the advice process.”
Alignment with first charge market
Stewart said the issue of fees, first brought to light by Mortgage Solutions in 2016, is still a lingering problem.
“The fee element is still a huge negative hurdle that brokers need to accommodate before the product becomes more widely used,” he says. “As a broker and a master broker I personally look forward to the day when the broker fee becomes the same cost to the client as an arrangement fee does currently for a first charge mortgage. We need to get as close to parity with the first charge market as possible and the sooner we do that the better.”
Stewart said greater transparency in the form of an industry league table of average fees or ‘a declaration within the disclosure document of the average fee masterbrokers charge’, would be a big help.
“I am more than happy, should the tide go out, to show what we have been wearing all the time,” he adds.
Mortgage broker Matthew Fleming-Duffy, from Cherry Mortgage & Finance, agrees fees and costs are a big concern.
“As brokers, we must consider our clients’ needs and preferences and try to match this to the best possible solutions for them,” he said. “Second charge loans are always more expensive than first charge mortgages and many consumers are reluctant to secure additional loans against their home unless it is absolutely necessary.”
Phil Whitehouse, managing director, MCI Mortgage Club, fears the stigma attached to secured loans by mortgage intermediaries is continuing.
“Whether it is the fact that sourcing alongside a remortgage quote is still too complicated or the fact that brokers feel that passing a customer to a secured loan broker is too much of a risk of losing customer control, they simply haven’t embraced second charges as first expected,” he said. “Many improvements have been made in the second charge market but there seems to be still a missing ingredient before the mortgage market fully takes secured loans under their wing.”
Evolving client profile
Martin Reynolds, chief executive of Simplybiz Mortgages, however, is more optimistic.
“MCD was never going to be the silver bullet for the secured loan market with an avalanche of new business for the lenders from day one,” he said. “It was always going to be the catalyst that opened the door to wider opportunities but one that would take time to mature. I think that it is important not to just look at the numbers but to look at the client profile, as I believe this has changed post MCD.”
Reynolds added: “We are seeing greater engagement from members and requests for help and guidance. We are seeing changes in products, criteria, process and behaviour, which are all positive.
“As we see more and more lenders offer a direct submission route you will naturally see greater adviser engagement. With that engagement comes experience, knowledge and more importantly confidence. The market will grow but I also think that just as importantly the customer profile will change.”