Clients whose credit profiles have deteriorated since they took out a mortgage are prime candidates for a second charge loan rather than a remortgage, Fluent Money has claimed.

Tim Wheeldon, joint managing director at Fluent Money, said brokers advising clients at remortgage are still clinging onto false preconceptions that second charges are always more expensive than remortgaging.

He said brokers should challenge themselves harder to consider whether a second charge could be the best option instead.

He advised brokers to consider whether the client’s credit profile has deteriorated since they took out a mortgage; if they have recently gone self-employed, moved jobs or had a string of short-lived employment contracts; whether there are financial penalties to pay for leaving the current mortgage; and if the client wants to repay the extra funding over a short to medium term.

If the answer to these questions is yes then he said a second charge loan should be a “serious consideration”.

He said: “On the face of it secured loans look expensive against the headline grabbing rates of 1.99% or less that the mortgage industry is so keen to talk about.

“However less is said about the high completion and administration fees charged by mortgage lenders.

“Those charges can be up to £3000 on a remortgage. Put into context, these can more than dwarf the costs associated with a second charge loan.

“So when brokers are talking about what is expensive, it is worthwhile doing a proper comparison before turning away from a second charge loan.”

Second charge rates now start from 4.5%.

Brokers told to consider second charges