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Get on the secured loans bandwagon

We are fortunate to work in a financial services market that is one of the most innovative and competitive in the world. Constant development means that borrowers can benefit from more tailored products to meet their requirements.

One of these developments has been the second charge market, which came into being more than 20 years ago. As with all innovations, some people embraced it immediately while others waited to see if it would be a success before pinning their flag to its mast.

We have also seen sub-prime make the transition from newfangled idea to mainstream product over the past decade. And now we are seeing the same thing happening with secured loans.

Some advisers have been understandably cautious about embracing secured loans but the burgeoning loans industry has cleaned up its act, interest rates have come down and products have become more diverse and customer-focussed.

As a result, we are fast approaching the point whereby brokers should be asking themselves if they have followed Treating Customers Fairly guidelines and given their clients best advice if they have not considered offering them a secured loan option.

The recent Mortgage Business Expo in Manchester saw many advisers trying to understand what secured loans could offer their clients that they couldn’t achieve through remortgaging. The repayment penalties for clients locked into mortgages for several years often make remortgaging prohibitively expensive. Secured loans could be the only sensible option for releasing the funds these clients need.

Similarly, many ex-council tenants who have bought their homes cannot remortgage as their councils have charges over their properties, but they can release capital through the use of secured loans.

Many brokers new to the secured loans market are surprised at the lack of upfront charges these products incur and the low early repayment charges involved. The other big difference is the varied income streams secured loan lenders will accept, including clients on benefits.

Brokers receive higher proc fees while being able to offer their clients flexibility similar to that which is available with flexible mortgages including shorter payment terms, the ability to overpay and a choice of fixed or discounted rates.

The secured loans market is becoming mainstream and with consumer demand growing, a host of lenders, packagers and brokers are getting on board. As a broker, how confident are you that you are offering best advice to your clients if you are not aware of secured loan products? This a bandwagon you cannot afford to ignore.

l See Comment, page 69

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