The rise of PTs creates a second charge opportunity for brokers and borrowers – Waters

When you consider that just 192,400 borrowers chose to remortgage with another lender, it’s clear that PTs are by far the most popular form of refinancing in this country. It’s easy to see why. With a product transfer, borrowers are almost guaranteed to be accepted unless they have had repayment problems during the life of their loan. It is almost like a safety net.

That is especially important now, during a cost of living crisis, when many borrowers may have found that their circumstances or credit profiles have deteriorated.

But as useful as a PT can be, there are a number of drawbacks borrowers must consider. One of the biggest is that they are simply pound-for-pound transactions, meaning the borrower cannot raise extra cash against their home even if they wanted to.

For many borrowers, that won’t be an issue. But I would wager that a significant number of those 1.27 million borrowers who took out a PT last year would have borrowed more if they could. A further advance is one option, of course. But not all lenders offer them and even if a lender does, they tend to be difficult to qualify for.

Typically, lenders also have restrictions in place about what you use the money for. For example, many lenders won’t allow you to pump the cash into your business or to buy an additional property.

The second charge solution

However, for these borrowers – and many other types – there is a solution for these borrowers: a second charge loan. Second charge lenders tend to allow borrowers to use the money for a greater range of purposes and typically offer more favourable income multipliers.

They are also more accepting of borrowers who have had blips on their credit record or those with complex income, which is important in the current economic climate. But the trouble is that most borrowers are unaware of the benefits of a second charge mortgage and assume they simply cannot borrow more. Therefore, it’s up to us to educate them.

Most brokers are very good at reaching out to clients who have six to nine months left on their fixed rate deals in order to find them a new rate. But I would argue they should be reaching out to any client they have put onto a fixed rate deal in the past 12 to 24 months to discover if they have further borrowing requirements. Undoubtedly, many of them will but will have been unaware they can raise further capital against their home.

Of course, if you’re unfamiliar with second charges, you might not feel confident advising on them, which is understandable. However, there are plenty of specialists out there in the market that can advise on the loan; your job is simply to spot the opportunity, which you’ll get an introducer’s fee for.

For me, this is a win-win for everyone. One the one hand, the borrower is happy; and on the other, you can rest assured that you have provided a good service to your client. That’s why rather than fear the rise of the PT, brokers should embrace it and see it as a means of diversifying their income streams.