In less than six months’ time the Second Charge Market will be subject to unprecedented regulatory change as the supervision of seconds is transferred out of the consumer credit into the mortgage regime to coincide with the implementation of the Mortgage Credit Directive (MCD).
For many, this change is long overdue given there will be greater consumer protection as a direct result; however this poses a question for those intermediaries who may have previously dismissed second charges. They will need to consider whether now is the time for a review of their advice proposition. Put simply, if you are in the business of helping clients access the equity in their property– why only consider one type of mortgage? After all, from March 2016 that is exactly (what is currently described as a second charge loan) will be.
I have worked with mortgage intermediaries for many years and am hugely passionate about the increasingly important role they play in providing access to the best financial options for their client. In a continuously evolving financial services industry, the value of quality financial advice has never been more important. Especially at a time where there is a huge emphasis on making sure clients have been given the best possible product to meet their needs.
I’m told that second charge loans have never been more widely accepted by mortgage networks and clubs. My recent experiences of network discussions and positive dialogue with key industry figures certainly supports this view.
Time pressures, lack of knowledge, fear and historical reputational issues are some of the big sticking points around getting a greater proportion of intermediaries actively involved in the second charge market. But as the countdown to the MCD truly begins, there has never been a better time to consider how a second charge could help clients get the right deal for their circumstances, at a time of historically low rates in the second charge sector.
What is pleasing to see is a new wave of intermediaries who are considering second charges for the first time. Some of the key drivers for this are applications from borrowers who do not want to disturb their existing mortgage arrangements, for example interest only borrowers and those locked into attractive deals. There are also some compelling reasons for landlords to consider using second charges to make further investments or facilitate renovation projects and this is a sector that will benefit from the buoyant remortgage market within the buy to let sector.
My advice to advisers would be to think really hard about including seconds within your scope of service when the MCD is implemented next year. Make sure you speak to a specialist master broker about how they can help you build a second charge proposition into your advice model so both you and your clients don’t miss out on the opportunities the second charge market presents.
Marie Grundy is managing director of V Loans