Steve Harness is commercial director at The Loans Engine
Sometimes all you want for your industry is a fair hearing, and a level playing-field, from which you can set out the pros and cons of your product, and how it might potentially provide a great solution to client’s needs.
To be fair, from a regulatory point of view, we now have that with second-charge mortgages – since the MCD, and the sector’s inclusion under MCOB. However, when it comes to an understanding of the products, and our market, I sometimes feel like we are damned if we do, and damned if we don’t.
Take, for instance, the recent second-charge lending figures for March as issued by the Finance & Leasing Association (FLA). Anyone who has taken an interest in the second-charge market over the past few months, can’t have failed to notice a significant level of commentary about how the market has not appeared to ‘kick on’ from the MCD, with various arguments put forward about why this might be. Certainly, you need only review the past six to eight months lending figures to acknowledge that business volumes have not been at earth-shattering levels.
And so we come to March’s figures, which hit £93m – an 8% increase on February – although let’s be clear here, the three-month figures were 1% down on the previous quarter, and the 12-month figures were 3% down on the previous year. I don’t think any of us would suggest this is somehow a ‘boom time’ for seconds.
So, to read an article in The Guardian recently concerning the March FLA figures, and to see phrases such as record numbers are ‘saddling’ themselves with second-charge mortgages, and to hear debt charity, StepChange, say that “alarm bells should be ringing”, and that this was a sign that ‘consumers [are] taking on risky levels of debt’,seemed utterly out of kilter with what is actually happening.
For a start, where was the acknowledgement of affordability in all this? Where was an understanding of seconds within the MCOB framework? Where was the acknowledgement that consumers might actually be better off with a second-charge mortgage, rather than a remortgage? When was the role of the adviser ever mentioned in all of this? It wasn’t, except it did include one adviser suggesting they had seen a ‘massive increase’ in second-charge business over the last year, which might actually be more to do with the regulatory changes and the need to cover off other product options, not just a straight remortgage by default.
That level playing-field I talked about earlier was certainly not there within this article, which essentially played out as ‘second-charge mortgages are bad for consumers’ even though they might provide a cheaper, more suitable option for a customer, rather than any other method of capital raising. The arguments being made about consumers taking on higher levels of debt are, in no way, second-charge specific, but you would not think so from the article in question. The fact the same argument could be made in relation to remortgaging, or (more to the point) much higher levels of unsecured borrowing such as credit cards, personal loans and the like, was seemingly lost on the author. And that’s my kind way of putting it.
So, it’s perhaps no wonder that master brokers like ourselves, and advisers when it comes to their clients, continue to face an upward climb in terms of promoting greater understanding of second-charges, what is actually being signed up to, and the true cost of a second-charge mortgage. It’s really no different to a further advance, albeit with a different lender, and yet here, and in many other articles, it is still frowned upon. The regulatory field might have been levelled to a great degree last year, but it is clearly going to take time and lots of communication to be able to say the same about, the personal finance press, the consumer lobby, and the like.
It’s therefore a good thing that we continue our work to drive down second charge costs, (rates from 3.73% and a £295 fee), and are ready and prepared for the hard yards ahead.