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Second Charge Lending

Adviser warns against ‘greedy’ approach to second charge fees

Hannah Uttley
Written By:
Posted:
June 9, 2016
Updated:
June 16, 2016

Directly Authorised (DA) brokers must ‘mentally condition’ themselves to consider second charges in the same manner as first charges and ensure fees are not out of proportion, an adviser says.

Speaking at a second charge masterclass this week, Martin Stewart director and founder of London Money (pictured), said there was still an issue with fees charged by many brokers and packagers in the second charge market, despite the Mortgage Credit Directive (MCD) bringing them into line with first charge loans.

Stewart confirmed that London Money Loans, the second charge arm of London Money which launched in April, has so far charged an average of 1.8% for advice.

He said: “There may well be brokers out there charging excessive fees but that’s their problem. There is a need to be commercially minded but not to be greedy. This is now a regulated mortgage contract on a par with first charges, so mentally, you’ve got to condition yourself to treat them in the same ilk.”

Stewart also warned that brokers were at risk of their business being taken elsewhere if they failed to consider second charge mortgages as an option within their advice scope.

“For DA brokers, your biggest threat isn’t the FCA, your biggest threat is the packagers, the networks and the mortgage clubs. They will try and squeeze your market over the next few years and the banks will do the same,” he said.

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“So it’s important to realise what an opportunity is and then that can help fill any income gaps that we might suffer going forward.”