Following news that the Financial Conduct Authority (FCA) is looking into the second charge sector, Specialist Lending Solutions asked brokers what they’d like to see from the review and capping fees came out on top.
Sav Agathangelou owns Kingsgate Financial Services. He says the main barrier he’s experienced when advising on seconds is the “large fees typically charged as an arrangement fee by the lender and/or master brokers and packagers”.
He says: “If the FCA wants to help this particular sector then a cap on fees to make overall costs lower would significantly improve their competitiveness when compared to the costs of a remortgage.
“Everyone knows that a second is a viable alternative to someone with an ERC to pay but when the fees associated with the second charge are similar to, or exceed, the penalty for early redemption, then the lower rate of a remortgage (especially if it reduces the existing rate in situ) makes it the much cheaper option.”
Jonathan Burridge, sales manager at The Mortgage Broker, says specialist broker fees remain disproportionate in the seconds market.
He adds: “I would suggest that the main issue is around providers’ ability and willingness to engage with the wider intermediary market, more advisers need to learn not be afraid of seconds. It is a question of education and access.”
Ansar Afsar, director of Manchester-based We Know Mortgages says: “Remortgaging to borrow extra, having one payment, on the lowest interest rate is the popular route. I believe most borrowers would prefer to have one established bank or building society registering the debt as opposed to two. Further advances are appealing but borrowers need to factor in arrangement fees and early repayment charges.
“Second charges and secured loans are down the pecking order because it’s with a different institution with different terms and rates, so this does put off borrowers. Capping fees would make products more attractive but remortgaging and further advances are typically first options for borrowers.”
Consumers are the losers
However, Steve Walker (pictured), director of Promise Specialist Lending, says the FCA’s current interest in the sector may mean mortgage brokers have to engage with seconds.
“If the scope of the review included how poorly most mortgage firms have integrated seconds in to their advice process they might pay more attention,” he says.
“Generally, there is still a disconnection between mortgage intermediaries and how to offer seconds in a consistent and fair manner. Consumers are the losers and I would welcome greater focus on the huge numbers of loans which are not being written due to poor process and apathy.
“The FCA review on mortgage advice in 2015 was helpful in highlighting the practical ways in which brokers could get it right. Something similar in the second charge sector would provide a wake-up call for those firms way off the pace and some welcome guidance for those which need to do some fine tuning,” he adds.