View more on these topics

Secured Loans Watch: Advisers warming to seconds


Second charge products may not be the most obvious route, but intermediaries are now acknowledging their presence

Some weeks on from the implementation of the Mortgage Credit Directive it is now possible to start to gauge how the second-charge market has handled the change and how we might develop the sector.

On the whole, the implementation of the MCD went well. One of the major challenges was determining how the intermediary market might react, what route they would opt to take, and how we could position offerings to meet those different choices.

Back on the agenda
Achieving regulatory compliance by a certain deadline seems to be a rather effective “leveller” in this marketplace. It focuses the mind and makes you look deep into your organisation to ensure it is not just fit for purpose now but future-proofed for what may come over the horizon.

As we all know, regulation does not tend to stay the same for long, so the anticipation has to be that we will face ongoing changes at both a national and European level.

It is an unfortunate fact of life that legislation can often be open to interpretation. A good example of this is documentation requirements. As the second-charge lenders have rolled out their ESIS templates, opinion is divided on the extent to which they need to differentiate who is involved in the advice/packaging process.

I suspect their anticipation was more along the lines of a referral and the master broker providing the full advice service, rather than the two-tier approach of intermediaries giving the advice and using a master broker for packaging.

And what of intermediary reaction to the MCD requirement to signpost a second-charge mortgage or an unsecured loan as a viable alternative to a remortgage or further advance? Well, as expected, the level of interest in second-charge products has jumped considerably.

The MCD has forced many intermediaries, for whom second charges were simply not on their agenda, to at least acknowledge their presence. This has led many to prefer to fully understand the product and find a route to market where they could provide them to suitable clients.

Let’s be honest here: nine out of 10 intermediaries will probably still find a remortgage the most suitable option. But it is worth the intermediary working through those other product options. Indeed, what about the one in 10 clients who are right for a second charge?

By failing to embrace the second-charge option, either through the provision of advice themselves or by introduction to a master broker, can intermediaries truthfully say they are servicing the client’s needs?

Unsecured loans
What is more, what about the simple business and potentially valuable income-generating opportunity an intermediary will be missing by disengaging from second charges? The good news is that there is no shortage of potential partners with whom to tie up to support that decision and to smooth the path towards advice provision to potential second-charge clients.

Finally, let’s not forget the mention of unsecured loans in the MCD. I acknowledge intermediaries do not need to include unsecured loans in their service proposition but they do need to signpost them as a viable alternative.

Having done so, it would be shortsighted for an intermediary not to fulfil that need if, for instance, their client homes in on an unsecured loan and asks for more information. I am amazed how many intermediaries shrug this off as not part of their chosen service proposition and “out of scope” to their clients.

It is a simple message but there are some who continue to ignore it. It makes sense from all perspectives – regulatory, commercially, client-centric – to look at the full range of options advocated by the MCD, not least second charges. It also makes sense to find a route to market that delivers in all areas.

The obvious benefits of getting this right should be plain for all to see.

Steve Harness is commercial director at The Loans Engine



Secured Loans Watch: New dawn will rely on experience

We are entering a new era in which brokers will not only embrace second charges but advise on them directly The phrase ‘a new dawn’ gets bandied about, particularly in financial services. In the past few years, allegedly, we have had a new dawn for pensions, a new dawn for savers and at least three […]


Secured Loans Watch: Human factor cuts out MCD fuss

The most important work in the transition to the Mortgage Credit Directive rules took place behind the scenes In the years leading up to the new millennium, when Y2K paranoia gripped the nation, an article was published in the New York Times that read: “The nation’s utilities told a Senate panel that they were working […]

Guide cover

Guide: Johnson Fleming produces auto-enrolment checklist

For a job as big as managing the auto-enrolment changes, it’s important to know what has been completed and what still lies in front of you to give you the reassurance that everything is in hand. Getting the planning and project management right at the outset can help you see the path ahead and ensure everyone knows their roles and responsibilities. To help with this, Johnson Fleming has produced a checklist outlining every step that needs to be taken when preparing for auto-enrolment.

Frexit & contagion risk in Europe

Many commentators have suggested the UK’s exit from the European Union will trigger a domino effect, leading to its eventual break-up. Neptune Head of European Equities Rob Burnett discusses the likelihood of this happening. Click here to read more Important informationInvestment risks Neptune funds may have a high historic volatility rating and past performance is […]


News and expert analysis straight to your inbox

Sign up

Why register with Mortgage Strategy?

Mortgage Strategy continues to be the market-leading B2B mortgage publication in the UK, and provides trusted, independent insight with the aim of helping, promoting and analysing the latest developments for mortgage professionals.

News & analysis delivered directly to your inbox
Register today to receive our range of news alerts including daily and weekly briefings

Mortgage Strategy Events
Be the first to hear about our industry leading conferences, awards, webinars and more.

Research and insight
Take part in and see the results of Mortgage Strategy's flagship investigations into industry trends.

Have your say
Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

Register now