Two-fifths of first charge brokers have applied for second charge mortgage permissions, according to the FCA.
The FCA says that 2021 firms applied for permission to advise on second charges, out of a total of 5051 that have first charge mortgage advice permissions.
The second charge market was regulated by the Consumer Credit Association before 21 March, when the Mortgage Credit Directive went live and the FCA took over.
Brightstar chief executive Rob Jupp says: “I would think a significant minority of that number achieved permissions because they felt they wanted to keep their options open but have subsequently decided not to have seconds within their source of business and have outsourced that.
“So that’s not a complete reflective picture of how many DAs are doing second charge business and giving advice today. I would suggest to you that the actual true figure would be somewhat lower.”
Positive Lending managing director Chris Fairfax says: “I’m sure that the remaining three-fifths will also move to gain that second charge permission, because it gives them abilities about their scope of service, such as using the word ‘independent’.
Brokers can only use the independent label if they have second charge permissions.
Fairfax adds: “I think the relative small uptake is probably a lack of understanding and probably a requirement to continue to use a packer, but I think long term that will change.”
The 5051 figure does not include brokers that are appointed representatives of networks.
Only three major networks now allow their members to advise on second charge loans, with five demanding they refer second charge cases to master brokers.
The MCD says that where a client wishes to increase borrowing, they must be told a second charge loan could be more appropriate than a remortgage or further advance.