Brokers warned on loan options

Brokers have been warned that if they don’t advise on second charge loans they could be running the risk of breaking the Financial Services Authority’s rules on best advice.

John Webster, chief executive of Swift Group, says that although more advisers are offering second charge products, he is concerned that those who don’t are failing to treat their clients fairly by providing a full range of options.

He adds: “Inter-mediaries who don’t advise on second ch-arge loans should ask whether they are offering their clients best advice.”

Consultant Terry Pritchard agrees: “This could be a problem in the future as second charge loans are a better option that remortgaging for some people. For example, someone who has accrued a few arrears on their mortgage but doesn’t want to remortgage to a higher rate could find taking out a secured loan a better option.”

Ray Boulger, senior technical manager at John Charcol, says brokers should either advise on second charge loans or refer their clients to someone who does.

He says: “At John Charcol we don’t offer second charge loans because they are only suitable for a small percentage of our clients. But because this is a valuable product we refer such cases on to a firm we know can give better advice on second charges.”

But he adds: “There is more potential detriment to people incorrectly offered a second charge loan than the other way round.”