I’ve read and heard a lot of rubbish in the last few weeks about second charge mortgages. Over a year since they became regulated, the anticipated surge in volume hasn’t materialised.
But it’s no good blaming brokers for not embracing seconds, which is what too many parties with a vested interest seem to be doing. And it’s not helping.
Yes, of course some brokers are not up to speed with seconds and educating them is essential. But let’s stop ignoring the big, fat, inflated elephant in the room.
Many brokers are not comfortable recommending seconds because they believe their client is going to face rip-off fees.
And in many cases, I think they’re right.
The biggest problem with second charge mortgages is the inflated fees charged by many so-called master brokers and certain packagers.
TFC Homeloans has a clear, fair and transparent fee structure across all regulated products, including first and second charges. A handful of other firms have moved to a clear, flat fee structure too.
If some of us can do it, how can others still justify fees of up to £5,000 on a £120,000 loan?
I don’t think they can.
Regulating the market
The regulator wanted to put second charge mortgages on a level playing field with first charges in March 2016. Some businesses have taken that seriously and made changes, and more will follow, but plenty are hanging onto high fees.
It’s not just two-bit operators that charge high fees on seconds but some of the biggest firms in the sector – the award-winners, the event sponsors and the advertisers. However, it can be difficult to find out exactly how much some firms charge without submitting a case to them.
Mortgage Solutions reported last September that some firms were charging over £5,000 on a £120,000 second charge loan while other organisations declined to disclose their fees.
I wonder why?
Many networks are already revisiting their second charge distribution strategy, introducing direct-to-lender panels and a wider choice of distributors, giving their appointed representatives a choice about who they can deal with.
Of course, there are other things stopping seconds from surging – the failure of the major sourcing systems to adequately address seconds and the low remortgage rates currently on offer to name but two.
But blaming brokers for failing to embrace seconds isn’t OK. I know you’ve got your eyes wide open and still see the same lack of parity with first charge lending that I see.
Let’s be clear, be open about our fees and give brokers more credit. Offer a fair, transparent route to a second charge mortgage and they will take a second look.