Last month saw the launch of Omega Secured Loans. Loan Introducer speaks with Mark Jones, sales director at Omega Commercial, about why the company decided to make a move into the second-charge market.
Q: Why did you launch Omega Secured Loans?
A: Omega as a group have always tried to listen to its introducing partners and been aware of the growing secured loan market. Over the last 12-months we have seen an ever increasing demand from our introducing brokers to provide a secured loan service or at least consider this as an alternative source of funding.
Last September we attended the FSE at Billingsgate and listened to the FCA present its latest consultation paper in which it made reference to point 3.49, “’in light of the transfer of second charge mortgages to the mortgage regime we believe that this should be extended so that in all such sales the customer is made aware that in addition to a further advance or re-mortgage, a second charge or unsecured loan may be more appropriate.” It became clear this was a market we could organically grow into, crucially however, only if we were working with the right personnel to bring both experience and expertise and could adopt the Omega philosophy. It was at this stage we commenced the process which resulted in the launch of Omega Secured Loans in early 2015.
It’s an exciting and growing industry and we’re delighted to now be part of it.
Q: What types of requests are you seeing for secured loans/where are they coming from?
A: No two deals are the same and we ensure we treat each enquiry on its own merits, seeing a vast array of different types on a daily basis. It’s still very much an awareness and educational process, working with our introducing brokers to ensure they are conscious of what terms are available.
Every day we receive a call from an introducer suggesting they doubt very much that we’d be able to help but thought they’d call just on the off chance. To their surprise more often than not, the result being we can indeed assist by placing their client with a lender on a rate they never thought accessible. This kind of conversation is increasingly common which is great news for us and can see our educational marketing increasing awareness amongst our introducing partners.
With an average commission to our introducers currently at £1,347 it’s certainly worth making those calls.
Q: How do you feel the secured loan market differs from the commercial market?
Assessing this today – Regulation would be the stand out difference.
The commercial market is currently unregulated as opposed to the Secured Loans industry which is now building towards regulation, the FCA guidelines to be in place for March next year.
There are very different processes already in place within our secured department: We take a full preference driven fact find and carry out recorded security and sales calls to all consumers as required by lenders, even before regulation. We set consideration periods and perform due diligence on both introducers and lenders. The packaging firm also covers all the processing costs meaning no upfront fees to the consumer.
I started my working career in 1996 with an IFA firm processing residential mortgages and moved into the secured loan market a few years later. The difference between the two at that time was huge. I felt I was learning to work in a new industry altogether, but the two are now more aligned. We should really be asking what is the difference between a regulated and an unregulated market, as we’ll be talking about regulated mortgages and secured loans in the same breath very soon if not already.
Q: You work with a number of networks, are you seeing demand from them for secured loans?
A: We are really noticing a perspective change across networks and the members within these networks, I suppose a large part of this is down to having a proven track record and already working closely with the majority.
We have to remember networks service their member’s needs and we are without doubt seeing more mortgage advisers switching onto the new guidelines and investigating secured loans to ensure they are offering the most appropriate advice to their clients. Due to this, networks are also realising they risk losing members to other networks if they do not offer a route to secured loans. No longer can a mortgage adviser just offer first charge products, they must offer best advice and consider all alternatives available to their clients to stay within FCA guidelines.
In my experience it used to be the secured loan broker requesting to be a panelled provider of a network and once panelled would then struggle to gain access to that network’s members. Now, we’re actually in open dialogue with networks on how regulation is going to change the market and how they should be positioning products with their members in mind. It’s refreshing that there’s a group of like-minded people in the industry working together across networks, brokers and lenders all having a common goal. In my opinion, this open approach will put the industry in a very strong position going forward into the new FCA regulated era.
I believe the right approach for a network, is to work with a company that understands regulation and has a business process and ethos reflecting that stance. It’s a risk to partner with a standalone sourcing system that doesn’t also demonstrate customers’ preferences or doesn’t supply the documented regulatory requirements. If you as a secured company are not providing the introducer with a full fact find, key facts and a reason why letter then I’m sure pretty soon you’ll be playing catch up.
Q: Do you feel the market appeals more to mortgage brokers than it did a few years ago?
A: Yes – Based on the following three points:
Some mortgage brokers are embracing the secured loan sector, having seen; regulation changing, lender rates reducing and therefore becoming more appealing, meaning products are now fully justifiable to their clients. These mortgage brokers are earning a decent revenue stream from deals that they either couldn’t place before or now have the peace of mind that their clients are receiving the most appropriate product from the full spectrum.
I’d suggest many mortgage brokers are just waking up to regulation guidance and are only now starting to compare all products available including secured loans. Whilst we still need to raise awareness further, this is great news, because they now realise secured loans are no longer the last resort they were ten years ago, and start to really embrace this as a solution.
To emphasise my point earlier regarding education and awareness, many mortgage brokers and even some networks still disregard this option as a serious alternative. The truth is that with the expected regulatory changes, in order to provide best advice to clients, they will have to quickly adapt to this ever emerging and increasingly mainstream solution.
Q: Do you feel regulation of the sector has added to its appeal?
A: I think regulation of the secured loan market was a long awaited move, very much welcomed by those within it. The industry is almost unrecognisable having moved so far away from where it was pre 2007. New lenders, new products, new personnel and most importantly more enthusiasm. For the established mortgage broker regulation is already here, with further requirements and clarity expected in March next year. It’s now up to us to continue the necessary conversations and related educational process to firmly embed ourselves on the desk of every mortgage adviser alongside the existing residential mortgage offering.
Q: Do you expect more lenders to launch into secured loans in the next 12 months?
A: I do, it’s a growing sector and the various market indices, although variations on the figures produced, all show the rise our industry wants to see. Where you have a growing industry you attract investors and there are still a few gaps to fill on the lending panel so at some point I fully expect someone to fill those spaces.
The more entrants within any market results in further competition which can only mean positive outcomes for consumers with reduced rates and new innovative products. Although being competitive with their product offerings, lenders still need to be conscious that preference driven decisions means they will also need to maintain high service standards during both the application process and within the after service they provide in order to achieve market differentiation.
Q: What new products do you think the market will see in the coming year?
A: I believe some lenders will be looking at the rental market as a new or increased offering. There are certainly opportunities with residential property funding depending on the income and expenditure stance taken, in view of lenders’ respective stress test policies where applicable. I also expect additional unsecured products to become available which will also continue to be considered and is only right when ensuring we adhere to expected FCA guidance. However, I would stress that we have to be careful where we draw the line, for example, questioning whether it would be more advisable for a client looking to raise a small amount of finance over a short term to do so on an overdraft or credit card than an unsecured loan?