As a result, brokers are increasingly being asked questions about these products, so it is important to address the issue of broker education in this area.
For a start, it is vital that brokers feel comfortable and fully informed when looking at first and second charge products side by side, as seconds continue to make their mark in the mainstream market. Ultimately the aim is for second charges to be considered by brokers as readily as they do first charge options. Sourcing systems will play an increasingly important role in this respect, by enabling brokers to compare first and second charge loans much more easily. As technology advances in this sector, we will start to see more systems move from treating the two products separately, providing brokers with a more holistic view of the options available to their clients.
The other crucial topic that goes hand in hand with the second charge conversation is that of charging structures. At the moment, the higher fees associated with second charges and the different pricing model compared to firsts are putting off a large number of brokers as the gap between the costs of first and second charge loans has become evident. For seconds to have any hope of reaching the same level of popularity as firsts, the industry will need to address this growing concern.
One key reason for this price discrepancy is the fee that master brokers charge in order to deliver the high level of satisfaction and service to the customer. This different regulatory structure between firsts and seconds has historically made second charge loans more costly to place. However, since MCD, master brokers are already starting to reduce their fees and thus bring them more in-line with first charge models. The result is more affordable and better value products, which will benefit consumers and brokers in the long run. The Loans Engine, for example, has recently announced that it will be scrapping its master broker fee and we are confident that others will follow suit. This will enable a more representative market to appear, making it much easier for brokers to compare first and second charges.
At Legal & General Mortgage Club it is our mission to provide our brokers with choice and education on this complex topic. We offer a direct to lender and master broker proposition for our members to cater for their needs. Our role as a club and distributor is to educate and provide support for brokers. We hope this will result in customers being given the right deal for them, whether that be a first or second charge product, and that they too will feel the benefit of more aligned pricing.