Looking ahead with second charge mortgages – Maeve Ward

Gone are the days when brokers felt that the product lacked innovation. Thankfully, outmoded views on high interest rates and charges have also been consigned to history.

There was a time when some brokers believed that once a customer had been turned down for a further advance or a remortgage there were no other options available. Here a second charge mortgage product might not only be a possibility, it could be just what the customer needs. Even brokers who appreciate the potential of the second charge mortgage as an alternative to a remortgage have been surprised by its potential to be used for a range of less traditional purposes.

There is now a varied set of products to choose from: variable rates; fixed rates with no early redemption charges and even base rate trackers. Today, there is greater flexibility on permissible age ranges, income and time employed and even impaired credit ratings, due to circumstances outside of their control rather than an unwillingness to pay.

What’s more, on some of these products it is possible to find interest rates starting as low as 4%.

More customers are opting to pay fees upfront to avoid paying interest over the life of the loan, reducing the risk of abortive costs. Additionally, lenders are taking active steps to reduce third party costs, for example, by increasing the use of desktop valuations, integrating Equifax and the Land Registry. This can have a beneficial impact on the final fee charged to the client by the broker as it’s offset against the cost to process the loan.

We believe that the industry has barely scratched the surface of this market’s potential. For some clients, second charge mortgages offer a more suitable outcome than other options – precisely why the FCA was keen to bring the product into the mortgage fold.

More and more mortgage brokers are giving the second charge mortgage solution a second look.