The trade body which represents second charge lenders said reports that master brokers were avoiding regulations such as providing bank statements to lenders were concerning and that it was likely the Financial Conduct Authority (FCA) would take a look at the intermediary market.
Speaking to Specialist Lending Solutions, FLA head of consumer and mortgage finance Fiona Hoyle (pictured) said that given how previous regulatory reviews had gone, second charge brokers would likely be under scrutiny.
“It’s really important if these practices are still ongoing then we are reliant on brokers to ensure those changes will be made,” she said.
“It is incumbent on the broker to ensure the advice they are giving is compliant.
“In the first charge market the FCA looked at lenders and then brokers and we’ve seen this in some of the unsecured markets too.
“If the FCA follows a similar approach it will do that in seconds too,” she added.
Hoyle is generally positive about the regulator’s review of the market – noting that it was not unexpected for it to take an early look at a newly regulated sector.
“It’s good to get an early heads-up about where changes need to be made,” she said.
“Firms looked closely at what was in that report as it’s always challenging when someone comes to look early on in a new regulation regime.”
Although second charge was not an explicit subject of the FCA’s Mortgage Market Study (MMS), Hoyle expects the findings to roll onto the sector.
As a result she is keeping in touch with the FCA to feedback on relevant issues, although the FLA is not part of the working groups tasked with implementing many of the report’s ideas.
First-time buyer deposits
Overall, Hoyle is pleased with the stability of the market which this year has been largely consistent after significant growth in 2017.
She noted that refurbishment and renovation are the common causes for second charge lending, but added that it was increasingly being used to source deposits for first-time buyers.
Lenders have also shown a growing interest in working directly with brokers and Hoyle expects this to continue to develop as they seek to grow the market.
“There is a lot of activity with second charge lenders talking to first charge brokers to ensure they are aware of the sector and how it works,” she said.
“It is a specialist market but that doesn’t mean it has to be small.
“Their focus will be on how to grow the market – they want to work with as many different brokers as possible,” she added.