Second charge product structure set to ‘mimic’ mortgage deals

The mortgage industry has had a few months to settle in following the implementation of the MCD in March and, as a result, an increasing number of brokers have introduced to – or plan to introduce – second charge lending to their advice offering.

Managing director of V Loans, Marie Grundy, said that in line with the change in regulation for the sector, second charges are likely to adapt in structure.

“There has undoubtedly been a period of readjustment following the transition to the new regulatory regime but I would now also expect to see some interesting developments in the way second charge products are structured, with a strong likelihood that they will start to look and feel like a first charge mortgage product,” said Grundy.

“We also expect a significant increase in the number of intermediaries offering second charge options to their clients following the alignment in regulation.”

Grundy said that second charges could be repositioned to rival remortgage and bridging lending.

“When MCD came into force we saw second charge mortgages move up a gear to squarely position themselves as direct competition for remortgaging and bridging products,” she said.

“One of the chief reasons for this is the speed of product turnaround. For example, the 16-day cooling off period has been replaced with a seven-day reflection period. This has enabled second charge mortgages to move onto a level playing-field and provide customers with a much quicker overall service.”

She said that, along with a quick turn around time, second charges also offer the ability to finish the loan early.

“Many second charge products offer low or even no early repayment charges which give borrowers the freedom to repay the loan without the restrictive timeframes we see in bridging transactions,” she said.

Grundy added that brokers who are venturing into the second charge arena for the first time should take advantage of the knowledge base available from those currently in the sector, such as master brokers.

“Mortgage intermediaries can readily access support, advice and a broad range of lending partners this way –  it really is about maximising the opportunities available within this sector and leading the charge to create better customer outcomes by offering a more holistic advice process,” she said.