Intermediaries who attended the Financial Conduct Authority’s (FCA) Live & Local roadshows on the mortgage advice process fed back to the regulator that second charges posed the biggest risk to the market.
Having only moved to the same level of regulation which applies to mortgage lending from 21 March when the Mortgage Credit Directive took effect, Stewart said seconds were still in ‘no man’s land’.
“They’ve shifted from guidance under the Office of Fair Trading to full regulation under the FCA, but people still think they are a bit murky. If you ask the same question in a year’s time the perception will be very different.”
Stewart, who launched second charge advice firm, London Money Loans, in April, said it was natural to feel unsure about entering a market for the first time.
“Once you’ve got over the mental hurdle of advising on your first second charge deal and see the end result, a solution to the client’s problem, you can see the benefit of being involved in this market,” he said.
“This time last year I hadn’t written one second charge, and when I did, it was like arranging my first mortgage 15 years ago, you learn as you go along. Since then I’ve personally arranged around £800,000 of secured loan finance.”
Legal and General Mortgage Club director Jeremy Duncombe, said a ‘fear of the unknown’ was holding mortgage intermediaries back from this market.
“I think there is still a confusion over whether mortgage brokers have to write the business themselves or whether then can refer it,” he said.
“Our advice is to align yourselves with a second charge partner if you are unsure about how much you want to get involved in the sector.”
Failing to understand the product, a lack of confidence and uncertainty about which firm to team up with were the most common reasons brokers still saw seconds as a threat, said Stewart.
He added: “We’ve just completed our first round of master classes for introducing mortgage brokers to educate them in these areas to encourage them to embrace this market.”