28 August, 2014
The second charge mortgage market has already surpassed the £300m lending mark in the first six months of 2014 – a 33% increase on the first six months of 2013.
There is no doubt the market is growing at a fast pace but can the same be said of new recruits into the sector?
Second charge lenders have made no secret of their appetite to lend, and the last 12 months has seen some impressive product offerings as well as new entrants. But is the size of the market big enough to match lenders’ appetite?
Attracting new blood
Master broker Y3S is currently embarking on a novel way of expanding its business. The broker is holding Dragons’ Den style interviews to find two new recruits to run a new second charge loan brokerage which will operate as part of its group of companies.
The successful candidates will be given a salary, directorship and a shareholding in the business which is already set up to trade with all relevant licenses with the Financial Conduct Authority.
Barney Drake, group director of operations at Y3S, says it has a spare office that can house up to 30 new recruits.
He says: “We have a business that’s ready to go – the offices, marketing support, compliance team and a huge amount of experience within the company of the second charge market.”
Drake estimates that Y3S currently accounts for about 10% of all secured loan products written on a monthly basis and he wants to grow this further.
“Pre the crash in 2007 we had about 100 members of staff. We are still in the same offices and have the capacity to still reach those numbers and we have a very aggressive recruitment strategy.”
Drake believes the market is set for significant growth in the coming years, largely due to the fact that mortgage brokers will be forced to consider a second charge as well as a remortgage under the new rules.
He says: “We are trying to get secured loans back on the map up to where they were pre 2007. As an industry we need to be doing more to take advantage of the opportunities we have in front of us.”
Steve Walker, managing director of Promise Solutions, says as the mortgage and second charge markets align under the new regulator, there will be people from the first-charge market who could easily adapt their skills to the second charge arena.
He says: “If you look at the advisory model we will be moving towards there are naturally going to be people who could move from the mortgage market to the secured loan market.
“I don’t think there will be any problems recruiting advisers or front line staff.
Where firms will always have a challenge is finding those with detailed underwriting experience and that’s probably not the kind of role that is going to be filled by a recruitment agency, but instead by you knowing them or them contacting your business.”
Robert Sinclair, chief executive of the Association of Finance Brokers, however does not believe the need for new recruits into the sector is as urgent as it is in the first-charge market.
He says: “There are a number of firms in the second charge market who can cope with more than they are currently doing and I think the people running those businesses are experienced enough to be able to grow their businesses responsibly.
“I don’t see a capacity issue in the second charge market – I worry more about the first charge mortgage market and what will happen if everybody suddenly panics when they see the first rise in base rate and want to remortgage.
“I don’t see seconds in that same space,” he says. “I think the increase in second charge loan volumes will be much more gradual. I don’t see a big spike coming like what could happen in other parts of the mortgage market.”
Simon Stern, business development director at Prestige Finance, says although the market is growing, transaction numbers are not necessarily increasing at the same rate and an increase in the average loan size accounts for a lot of the growth that the market is experiencing.
Nevertheless, he says the introduction of a new regulator and regulations means firms are having to strengthen their teams across compliance, administration and underwriting.
He says: “Our company has had to change its philosophy. We now go very much for recruits with experience, whereas in the past we would have gone for people with perhaps not as much experience and trained them up.
“In today’s market, particularly because of the demand you have to have experienced people, especially on the new business side.”
A New Generation
As well as experienced staff, Stern says young people are also key to maintaining the growth of the sector.
“A frustration for me is that we don’t get enough young people into the industry,” he says. “We have some wonderful young people at Prestige Finance whom we are developing but I wish there was more effort put in by the larger companies to develop graduate schemes.”
Stern says young people also have an advantage when it comes to technology.
“There are big IT developments going on at the moment in the industry. Young people have an edge over the older generation when it comes to this – they can pick things up quickly and technology is second nature to them, which is marvellous and an added benefit to any company.”
But is the second charge market and finance industry still attractive to the younger generation?
Alistair Ewing, director of Scottish based Blimey Loans, says it is.
“The Banks have got the blame for the recession in the eyes of the public so brokers are off the hook and still offer good career progression, particularly in the South, where people can get a couple of years’ experience and move around for promotions,” he says. “There are fewer brokers in Scotland which means we get the best talent in the area and our clients benefit from the experience of our team.”
Ewing says there has never been a better time for those who lost their jobs during the recession to return to the industry.
“The best time for them to re-enter is probably now,” he says. “The market has grown to around £50m a month. We can’t seem to get past that, but there is increased competition with new lenders entering the market and stepping up the technology behind sourcing systems. New blood will enhance the change that is already underway and help companies really harness those innovations to enhance customer experience.”
As the new regulations come into play, technology will play its part in helping firms with their compliance issues and also their recruitment.
Walker says good technology will be essential for firms in the second charge industry.
He says: “Technology makes it easier regarding front line staff talking to clients about loans because it makes sure everything is done in a complaint manner. It can also help significantly when it comes to training and recruitment.
“Technology can offer efficiencies as well because you can get to a yes or no more quickly.”
For any industry to grow it needs to attract new blood and ideas to thrive, and the second charge market is no different.
Lending volumes have been growing at a healthy and consistent rate for the last few years but if the market is to match the lending volumes seen prior to the recession, firms will inevitably need to expand. For those that do have the resources to recruit, now it seems would be a good time to do so, in order to take advantage of the further increase in lending that is hopefully on the horizon.