Could it be that the Mortgage Market Review, actually turns out to be the catalyst that brings second charge borrowing onto the radar of the many advisers who have resisted any other method of capital raising apart from the tried and tested remortgage?
Figures along with some interesting stories of a somewhat overenthusiastic desire to please the regulator by certain lenders show the impact of the new affordability rules. Given some lenders’ reaction to ‘responsible lending’ in the exhaustive (and exhausting) level of information now being required, it is hardly surprising that the rejection rate of cases, deemed no longer good enough to consider, has gone up. What is unclear is how many applicants and their advisers just lost patience with the increasingly long winded process and withdrew?
And that is where I think the second charge market will step in and help clients and their brokers, who have only ever considered they can raise money by remortgaging or seeking a further advance. Not only has the regulator made it clear that it expects advisers to consider (and be seen to consider) all avenues for a client but also the changes to affordability in the first charge sector are bound to push even the more reluctant broker to look at a second charge loan.
Before I start getting hate mail suggesting that the second charge lenders are not heeding the MMR message, I would say that apart from second charge lending being of a much shorter duration than a mortgage and on the latest evidence of Q1 repossession data for second charge showing that numbers were down over 43% to just 128 properties, I would suggest that second charge lending has probably already got its affordability matrices about right.
In the meantime, there has never been a better time to look at a capital raising world where the old certainties, with remortgage as the trump card, are unlikely to be ever the same again.