Secured Loans Watch: Give second charges a first glance

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The sector is in rude health but it needs a way of spreading to the consciousness of brokers who are not yet engaged

It is almost six months since the Mortgage Credit Directive brought second charge mortgages to the masses. Master brokers spent years waxing lyrical about the sector’s merits with some success.

Now, with the regulator firmly behind us, the final piece of the jigsaw has been laid. Many will look back and ask themselves how it was that they worked as a mortgage adviser for all those years without giving second charges a second glance.

Sadly, however, there are many others who still do not understand where a second charge loan can work for their clients, and who remain uninterested. Some even go as far as to make an enquiry but dismiss the second charge option before they have got the results back.

This appears to be because they are set in their ways and believe refinancing through a remortgage is the answer to everything. So it seems we still have plenty of work to do.

Welcome uplift

The good news is that there has been an uplift in both the number of enquiries for second charges and the number of completions. Clearly, some of those enquiries are for cases that would not have taken this route previously.

We still have a long way to go to fulfil the objectives of the MCD, so that a second charge mortgage is compared to a first charge remortgage on an equal footing on every capital-raising transaction, but the journey has definitely begun. We, and others, will continue to work hard to educate anyone who is willing to listen to us, because we firmly believe that knowledge of the sector will assist mortgage advisers in their own businesses and help them to retain more customers.

It would be foolish to expect consumers to be fully aware of the changes and actively searching for a second charge mortgage. When this sometimes happens online, it can be hard for borrowers to find the information they need. It does not help that most mortgage intermediaries’ websites do not even mention second charges.

This would suggest that many firms have a lack of knowledge or confidence in this market. It also means that the services of a specialist master broker are even more essential for them to remain both compliant and compelling as they compete with other firms for customers’ interests. The key here is continuing to break down any preconceived negativity about the sector from our intermediary communities.

A great starting point is for advisers to add questions about second charge mortgages into their own fact-finds. If you set up your line of questioning in the appointment around a remortgage, guess what? – the result you get and the advice you give will probably be to remortgage.

Good advisers will be open to all possibilities and leave no stone unturned to ensure that the ultimate recommendation is truly best advice and covers all options.

Thorough fact-finds

At Brightstar, we have seen a significant increase in the number of applications that have converted to completions for the clients that have been introduced to us. I feel this is because our fact-finding is thorough and we invest enough time at the outset into establishing the precise needs of the borrower and how best to match them, while ensuring that they are not confused by jargon.

A thorough fact-find conducted in this way means that, if a client does take a second charge mortgage, they fully understand what they have taken and why, and how it compares to the alternatives.

The sector is in rude health. I believe it has been spoken about more than any other specialist area in 2016 and there is no reason for that not to continue. What we need now is a means for it to spread to the consciousness of brokers who are not yet engaged and have not realised how second charges are of value to a significant proportion of their clients.

It is always a challenge to change the way you do things, especially if you have done them a certain way for a long time. But everyone needs to move with the times, or those around them will act more quickly and leave them far behind.

Bradley Moore is director of second charge loans at Brightstar