Mortgage Credit Directive: assessing the impact so far – Maeve Ward

by: Maeve Ward, managing director, property finance, Shawbrook Bank
  • 27/10/2016
  • 0
Mortgage Credit Directive: assessing the impact so far – Maeve Ward
It is now six months since the Mortgage Credit Directive (MCD) came into force – an ideal moment to make an initial assessment of the changes and see what the longer-term picture might be, writes Shawbrook Bank's Maeve Ward.

There have certainly been plenty of changes and most of them to the benefit of the consumer. But, in some ways, the professional side of the market – lenders and brokers – have not been so quick to take advantage of the some of the new opportunities.

Benefits for consumers

One of the most important changes in March was that the Financial Conduct Authority (FCA) brought second charge loans under the mortgage rules, putting them on a regulatory par with their first charge cousins. This opens the door to a new range of alternative mortgage products while offering the same level of consumer protection.

Borrowers who would like to release capital from their property but cannot alter the terms of their current mortgage without, for example, losing a preferential or fixed rate can now look to use a second charge product to achieve their goal.

High street caution

The high street’s caution opens the door for the newer challenger banks to step in to a market where innovation is key. They are able to tailor solutions for the diverse customer base, ranging from high net worth to victims of circumstance.

In this market, off-the-shelf products are not going to work.

So, if the potential is there, and consumer protection is in place, why has the market been slow to take off? Although the new product providers are keen to promote the opportunities now on offer, the broker community is perhaps still influenced by something of a legacy view of the second charge products, but a great deal has changed

Product providers and brokers both have a role to play to get this vital sector of the market moving. Lenders should be doing all they can to educate other market participants about the products and what they can do for customers. In turn, brokers should be taking every opportunity to learn more about second charge products.

Ultimately, the focus is rightly on the consumer and the responsibility that lenders and brokers share to ensure they are giving the consumer the widest possible choice to meet their goals. With charges and interest rates falling on second charge products and full consumer protection in place, there is every opportunity to make a difference.

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