‘Twas the night before Christmas and all through the house, not a creature was stirring not even a mouse. For the second charge sector however, things were not quite so peaceful. Indeed, with just weeks to go until the implementation of MCD regulation and, with it, full regulation of secured loans, both mortgage brokers and master brokers have been busy sorting out their permissions, schooling themselves on seconds and preparing for one of the most interesting years in the mortgage market to date.
Yes, 2016 looks set to hold big things for the industry and could see the seconds market reach its full potential as mortgage brokers are finally required to treat second charges in the same way as they do firsts. The regulator’s latest revelation that brokers who choose to have as little to do as possible with seconds will lose their whole of market status has upped the ante and further fuelled the possibility that secured loans could finally come into their own. With Santa set to do the rounds shortly, is this the big Christmas wish from the industry?
“My Christmas wish will be for all our brokers to hold the relevant FCA permissions for regulated mortgages and have implemented the Mortgage Credit Directive (MCD) advising and selling standards, by February 2016,” says Maeve Ward, sales & operations director, Shawbrook Bank. “Consequently, we all avoid sleepless nights by everyone being ready and up to speed with the new regulations”.
Marie Grundy, managing director of V Loans is also adding greater preparation to her Christmas list in the hopes everyone in the sector can start the New Year on a positive note.
“My wish is that second charge firms and lenders finish the year feeling prepared for the regulatory changes ahead in early 2016, something which everyone in the sector has been striving hard to achieve within the challenging timescales,” she says.
Jonathan Sealey, chief executive officer at Hope Capital says he hopes to see the upward trajectory the second charge market is currently on continue in 2016. According to the latest Enterprise Finance Secured Loan Index lending hit £93.3m in September as more intermediaries woke up to the potential of the products ahead of the Mortgage Credit Directive.
“The short-term lending sector has had a great year so far, breaking records and many people’s expectations,” says Sealey. “At Hope Capital we set ourselves a very ambitious target for 2015, and as things stand everything is heading in the right direction; our loan book is up and pipeline looks good. So my wish for Christmas is that things continue in the same vein and that come January the sector can boast the best year on record and, of course, we exceed our target. If that happens then we will have made a very big impression in the overall lending sphere this year.”
For Bradley Moore, Brightstar’s director of second charge loans, the ideal Christmas gift would be more acceptance of seconds from the market as a whole.
“[I’d like to see] greater acceptance of second charges from the wider mortgage market as a viable alternative to a re-mortgage,” he says. “This, aided by a continuation of current product innovation and record low pricing from our lender partners, along with a persistent effort on education on the sector as a whole would be a brilliant Christmas present.”
Indeed, further acceptance and engagement is also on Steve Walker, managing director of Promise Solutions’ Christmas list. Walker says the only way the market could achieve its full potential is by working together and embracing secured loans as a sister product to mortgages.
“If I have just one wish for the second charge sector in 2016 it would be that we see lenders, master brokers, networks and DA brokers all properly engage to ensure the industry is on the same page and prepared for the onset of full regulation,” he says. “For secured loans to be fully embraced by mortgage brokers and become viewed as a sister product to mortgages we need a cohesive approach. We need to be working together with joined up thinking and everyone working towards the same end goal. Seconds shouldn’t be something brokers reluctantly take on in order to meet regulatory requirements, they should excite brokers in the same way as mortgages do. I hope we can see real engagement across the whole sector. Only by achieving this will we see the market reach its true potential.”
In order for brokers to embrace second charges they need to understand the benefits such products can have. After many years thought of as a last resort product it is understandable that it has taken quite some time for mortgage brokers to start viewing secured loans as useful products serving a variety of purposes. Harry Landy, sales director of Enterprise Finance, says his festive wish is for this to continue with more brokers catching on to the advantages of seconds.
“The second charge market has enjoyed such a strong 2015 that it seems almost greedy to be asking for more, but my one Christmas wish would be continued intermediary understanding of the potential benefits of secured loans for their clients,” says Landy. “With the implementation of the EU Mortgage Credit Directive now merely months away, brokers can no longer ignore the potential of second charge mortgages and it is best they build their knowledge of them now rather than waiting for March to arrive”.
For Steve Harness, commercial director at The Loans Engine, a long-held Christmas wish is about to be realised.
“If you had asked me this question a couple of years ago, I would have said my wish would be for the regulator to say that any intermediary looking to advise on a capital-raising remortgage must also disclose that a further advance, second charge mortgage or unsecured loan may be a more appropriate product,” he says. “Now I appreciate that this isn’t perhaps the most festive of wishes and I would also like for it be accompanied by a decent bottle of plonk but in terms of our sector, wishes don’t come much bigger. Fast forward to the 21st March next year and this is exactly what we’ll get. And quite frankly it’s huge. It will drive improved customer outcomes all year round, not just for Christmas. So, in a way our Christmas has come early, although we’ll have to wait three months for the official green light.”
Meanwhile John Phillips, national operations director of Just Mortgages, has a wish for the wider industry. He says he’ll be asking St Nick to address one of the biggest problems facing the housing market – the issue of lack of stock.
“One thing I would wish for is for more property to come onto the market,” he says. “There is so much demand across the country at the moment but the biggest problem is supply, whether it is new homes or existing stock. As a country we have a target to build 200,000 homes a year, which would alleviate some of the problem, but year on year we fall short of this and every year the problem is compounded. We need a solution to this ever increasing problem to ensure the health of the sector, and of course our business.”
Paul McGerrigan, chief executive, Loan.co.uk says he hopes with MCD rules in play we see more innovation in the sector.
“We would hope that customers can get greater access to alternative, innovative lending products that are tailored to their needs and that the changes introduced by the Mortgage Credit Directive encourage the development of these,” he says.
And for Tim Wheeldon, joint MD at Fluent Money, top of his wish list is a bit of breathing space for the industry after a regulation-packed couple of years.
“[My Christmas wish] is for a chance for the lending industry to draw breath and fully assimilate the MCD before any more major regulatory changes are planned,” he says. “A two year window please?”