Paul Crewe is a director of Smart Money Loans
With the change of regulator from the Office of Fair Trading to the FCA on April 1, the second charge market will still not yet have been fully integrated into the wider lending family, because second charge is still not eligible as a regulated mortgage product.
The fact that this is likely to be the case for another two years means that we still have a two tier system in operation, even though we are now going to be all under the same regulator.
We can look in part to the EU’s growing influence, which the FCA has to take into account and clearly our home grown process whereby second charge has the consideration period, which allows customers time to change their minds, is still out of synch with the FCA’s avowed intent to harmonise the process across all lending channels, which should bring everything into balance in 2016.
Belatedly, the industry is waking up to the prospect that post April 1, those brokers who have not applied for interim permissions will find it very difficult to offer advice on seconds.
The concession which AMI won for regulated mortgage brokers who advise on consolidation via remortgage, not to have to apply for interim permissions, does not apply to the second charge market because the loans are not yet regulated contracts.
So while the FCA is expecting brokers to consider the widest range of options for clients wishing to raise capital, for those brokers who have not got interim permissions, the only options they have to consider for debt consolidation will still be remortgage or further advance.
Of course, for brokers who have never liked second charge, this is a good reason not to get involved and whether their clients will ever know there was another option outside the remortgage path is debateable, which is why I am hopeful that the new regulator will see the need to remove this ‘opt out’ before 2016, by ensuring that second charge advice is not excluded because of antipathy. Unfortunately, as with many aspects of our EU membership, we are not necessarily in charge of our own destiny.