This view is understandable.
The mainstream mortgage market was worth £256bn in 2017 according to the Bank of England, and that does not include an estimated £100bn for product transfers.
Meanwhile, last year the second charge market accounted for more than £1bn in activity for the first time since the financial crisis, according to the Finance and Leasing Association.
However, the good news is that second charge is a growing market, volumes were up 14% and cases up 10% in 2017. And it is still a £1bn industry.
It is anticipated that this growth may continue as market conditions, such as rising interest rates with consumers locked-in to longer term fixed-rate mortgages, make second charges more attractive.
This reason alone would be a good one for the market to consider its standing and examine whatever points may need to be improved upon.
But the Financial Conduct Authority’s (FCA) ‘concern’ about how the £1bn market is operating since being brought under the Mortgage Credit Directive (MCD) sector is clear and should be taken very seriously.
The regulator’s review of lenders last year forced some to take immediate action and prompted the FCA to call in lenders for a workshop later this month.
That letter is just one step down from full enforcement action – a serious situation indeed.
And the expectation from several sources within the market is that once lenders have been addressed, the regulator will refocus its attention down the line to distributors.
Further to go
To their credit, brokers and master brokers appear to have started tackling the key points concerning their part of the industry.
For example, clarity about the level of master broker fees and what is being charged has been improved.
Given all this, it is understandable that mainstream mortgage brokers may be hesitant to venture into the second charge market.
Positive transparent action
So yes, there is a risk that the second charge market is talking itself down and taking-up more column inches than it should, but unfortunately for good reason.
Positive and transparent action from all parts of the community to address these issues and adopt reforms will help to assuage the doubters and ensure clients receive the best outcomes, which may increasingly be a second charge loan.