SLS In Focus: ‘This year is all about affordability’ – Tandem Bank

Speaking to Specialist Lending Solutions (SLS), Brookes said: “This year is all about affordability following the financial turmoil of 2022, soaring energy and food prices, rapid inflation and the cost of living crisis.

“Our focus remains to continue to lend responsibly. The new Consumer Duty rules will add a further layer to the advice process but should be seen as an enhancement to that responsibility for brokers and lenders alike.”

He noted that second charges had become a “popular solution” for those who cannot or should remortgage currently, whether this was due to “prohibitive early repayment charge (ERC) periods or keeping a comparably low rate via a product transfer for the existing mortgage debt”.

Brookes continued that it was also popular with those looking to “undertake energy efficient upgrades, home improvements, refurbishment, or extensions” as well as those looking for debt consolidation as consumer debt was growing.

“Mainstream lending products may be inflexible or require greater levels of questioning on affordability. However, second charge mortgages can provide clients with a sensible, suitable alternative solution that fit their circumstances,” he explained.

‘Opportunity for growth’

Brookes continued that there was “opportunity for growth” in the second charge mortgage market as it was “still a relatively underdeveloped market and that demand was growing for this type of financing”.

He said that the market could benefit from “increased awareness and understanding” of second charge mortgages among consumers and financial advisers.

Brookes added that there should be a “normalisation” of the product, with mainstream consumer discussion, understanding and promotion of second charges across the market and attention in the media.

He continued that brokers who could “highlight” second charges as a solution would be in a “pole position to secure their business in the long run, providing a foundation for a successful advisory business not just today but in the years to come”.

“There is clearly a rising trend of customers with ‘specialist’ circumstances – those at Tandem we call “the new mainstream”.

He added that there were around three lenders he was aware of who were planning to launch into the second charge space later this year and they had “quite significant backing”.

“It will be fascinating to see their propositions and product offerings – competition is essential for a vibrant, developing market, combining future product and technology innovation.

“The second charge market is full of energy and a hive of innovation. That development and investment is driven by specialist brokers and lenders alike,” Brookes said.

The firm has a team of around 50 people consisting of administrators, case managers, approvals underwriters, broker supports and key account managers specialising in second charge.

‘Thorough understanding’ of client aims and financial position key

Brookes said that there were “some historical misconceptions” about the second charge market and it did require some expertise.

“The move forward approach must be a thorough understanding of client’s aims as well as their current financial position to help to inform the pathway they choose to recommend.

“Second charge is a specialist lending product and therefore requires expert support and advice to help clients with the complexities that can exist with this type of funding,” he explained.

Brookes continued that brokers “must proactively and reactively focus on putting customers in an adequate position to make decisions in line with their needs and financial objectives”.

“This is after all what Consumer Duty expects of us all – delivering good outcomes for customers which are consistent with the Duty. The Duty requires businesses to ensure that acting to deliver good outcomes is reflected in their strategies, governance, leadership, and people policies.”

Digitisation is ‘future of the market’

Brookes said that it endeavoured to “deliver as frictionless a journey as possible for broker and client alike”.

He added that it aimed to have “transparent criteria” as well as an origination process that brokers are “both confident and highly skilled in”.

“This enables delivery of good customer outcomes in as short a time as possible,” he noted.

Brookes continued that it was nearing the launch of its new lending platform, which it hoped would “greatly enhance the broker/client experience and further reduce our turnaround times”.

“Digitisation of process, which will in turn increase speed of completion, is the future of the market,” he added.