SLS In Focus: Brokers have ‘responsibility to consider second charges in every instance’ – Whitney

Whitney said that in order to provide “holistic advice” to clients brokers should be “considering second charges”.

“Every situation is different, however if a consumer has applied with capital raising requirements then brokers should look at the cost implications of remortgaging in the middle of a fixed rate, considering the early repayment charged.

“Brokers should be open-minded in reviewing the cost benefit of ring-fencing their first charge and considering a second charge that could be completed significantly quicker and potentially much cheaper for the consumer. The broker has a responsibility to consider second charges in every instance.”

Whitney was appointed Pepper Money’s head of sales for second charges at the start of last year, and before that was a business development manager at Optimum Credit for nearly seven years. He has also worked at OSB, The Lending Wizard and Freedom Finance.

He explained second charges can provide a “a perfect solution to an increasing cross-section of consumers”, adding that demand for the product would grow further this year as a “direct result of the cost of living crisis”.

He pointed to the lender’s recent Specialist Lending Study, which found that over 7.91m adults had experienced some form of adverse credit in 2022, which is an increase of over 1.6m since the year before.

The study also showed 71 per cent of consumers surveyed were worried about their financial situation as a direct result of the cost of living crisis and 76 per cent said that a £100 increase in their monthly bills would have “significant impact” on their finances.

He noted that second charges in the “majority of circumstances” can reduce customers outgoings and 80 per cent of second charges have an element of “debt consolidation”.

“Second charges offer a solution to reduce a consumers’ outgoings, whilst avoiding any unnecessary early repayment charges or affecting their current mortgage rate. We believe it is important that customers monitor their outgoings and reduce monthly bills to manageable levels.

“The need for reducing customers’ outgoings has never been more prevalent,” he added.

Whitney said that as first charge mortgage rates were increasing, along with customers tending to fix for longer periods, it was likely that there would be “growing demand from customers who have a capital raising requirement whilst they are in an existing fixed rate period”.

“Whereas they may have previously been prepared to pay early repayment charges to remortgage in order to achieve this, a second charge will often now make more financial sense than remortgaging away from their existing rate,” he noted.

‘Room for more lenders’ in the market

Whitney said that in a survey last year brokers said that there was “room for more lenders to enter the market”.

“There is certainly an increase in consumer demand and new lenders bring advancements in technology and product innovation which helps to create even better consumer outcomes.

“It is no secret that high street banks are exploring offering more specialist lending products, which was evident with Barclays’ acquisition of Kensington Mortgages. I would not be surprised if in the future there are new or established brands that enter the market,” he noted.

Whitney said that Pepper Money currently employed over 120 staff on the second charge side of the business and if the market grows it would look to “recruit to ensure we continue to provide outstanding service to our customers and brokers”.

“Our aim is to continue to lead the second charge market by consistently providing outstanding service to our customers and broker partners. We never take our eye off this focus and are continually looking at how we can develop our proposition to better serve second charge customers,” he added.