Once the MCD comes in, the number of brokers advising on second charges should grow exponentially
What an exciting sector second charge loans is. Having worked in the industry for almost 20 years, I have never been so positive about the opportunities this sector provides for everyone, from lenders to introducers and suppliers, and of course the people focal to all of us: our customers.
Whether in sport, business or life in general, the best reaction to being beaten down is to bounce back fitter and stronger. This applies to second charge loans for so many reasons.
Deserving of credit
Yes, there will be challenges as we settle into a new regulatory regime and adapt to the changes. But give credit where it is due: so much time and effort have been put in to make the process as fluid as possible and there has never been more cohesion between brokers and lenders than there is now.
Dare I go so far as to say I feel some lessons could be learned by the mainstream mortgage market?
The sector today is extremely competitive. Rates are keener than ever, with pricing reduced throughout the year as new entrants have come to market and established lenders have jostled for position. After the implementation of the Mortgage Credit Directive in 2016, and with continual education, the number of brokers advising on second charges should grow exponentially.
Today’s sector is much more tightly managed than it was. Despite not operating in it during the dizzy heights of the noughties, I am fully aware the market was not blessed with a great reputation. Much has been done by lenders and brokers alike to establish a more transparent process for everyone and the MCD will take this a step further.
The sector is flexible: whether it is a broker seeking to place a case with a lender, or a customer looking to satisfy their requirements, nobody wants to be pigeonholed into taking a ‘closest fit’ solution and now they do not have to.
Having the same products in both sectors is key if you expect consumers to fully understand the benefits of taking a second charge loan and want brokers to be able to run price comparisons between that, a remortgage and a further advance.
The days of offering a variable rate because it was the only option have long since passed and it is great to see the majority of lenders adopting this approach.
There are so many more product options available nowadays than there were pre-credit crunch, with lenders offering base rate trackers, fixed-rate options and standard variable rates. Rates are also much lower: we are no longer talking about 7 per cent-plus. Prime rates are in the 4 or 5 per cent bracket, much closer to those in the first charge market.
With the MCD a mere four months away, the sector will also benefit from the same processes as its big brother, the first charge market. The days of talking to a mortgage intermediary who knows their own job inside out but must then try to understand a completely different process and educate their client on it will be put behind us.
Technology will play a major role and it is great that most lenders have finally dug deep and invested in systems that are fit for purpose. We need that investment to take the sector forward.
You never know but in years to come at the Mortgage Strategy Awards we may even start to see an amalgamation of lenders in the same categories from both first and second charges. Now that would be a real move for the sector into the big time.
Bradley Moore is director of second charge loans at Brightstar