Paul Crewe, director, Smart Money
So we are now officially part of the Financial Conduct Authority’s regulatory purview and I think the significance has been lost a little, amid the scrambling for interim permissions in order to continue practicing.
When they write the history of second charge, I am sure someone with time to reflect will recognise this as the starting point when the sector started to receive the recognition as an important component of the overall lending market.
Up to now, even with the success it had up to the 2007/8 crash, second charge tended to be regarded as the black sheep of the family or the kind of relative, who could never be quite trusted to behave properly at a wedding.
Looking at where the old ‘secured loan’ originally came from, with its impenetrable terms and conditions, which were such gifts for those who were less than familiar with the concept of customer orientated service, it was hardly surprising that many brokers tended to avoid the sector as too risky for their taste.
Of course, the industry had reinvented itself before the last crash with the kind of transparency and simple terms that our cousins in the first charge market still struggle to match. But the legacy of those ‘Wild West’ days has still been a handicap for those of us who are trying to widen the appeal of the second charge market to the greater intermediary sector.
With the industry under the FCA’s control, we are going to benefit from the parity of regulatory oversight. The FCA has already made it clear it expects advisers to assess all methods of capital raising for clients, which will have a positive effect on brokers who have ignored second charge and only ever used remortgage or further advance as options.
Clearly, it is not going to be without its teething problems. Ensuring that we match the regulator’s template for lending will provide some challenges to lenders and brokers, but for those of us who recognise that there is a bigger future for second charge as part of an integrated lending industry, temporary difficulties will be a small price to pay.