Delivery of accurate, credit-checked second charge quotes is fundamental to a successful transition for the sector
We are just weeks from the implementation of the Mortgage Credit Directive, when regulated second charge mortgages will be absorbed into Mortgage Conduct of Business rules.
This is a positive step change for second charge stakeholders as it finally puts us on a level playing field with firsts as a genuine and credible option for those seeking additional finance.
There is much hype about the impact this will have on second charge volumes, with commentators predicting a noticeable uptick in enquiries. However – and in a spirit of transparency and honesty – it will still be the case that, more often than not, those enquiries will fail to turn into a second charge completion. The key difference will be that intermediaries will need to have those second charge comparison quotes on file even if the remortgage option is the one recommended.
The big questions here are around who can survive in such a world. How will second charge brokers cope with a large volume of enquiries that do not materialise into completions?
How important will the ‘right first time’ accuracy of second charge mortgage sourcing be to the intermediary?
And how might this play out in practice, in terms of both the intermediary’s ability to service their client and the major master brokers that will be looked upon to provide certainty in this area?
This being the case, every intermediary involved in this new second charge-embracing world will need to consider how to approach this dilemma.
Without doubt, a successful second charge broker will need a robust process in order to cope with the volume of referrals. But perhaps the most important point is that, when comparing refinance options, intermediaries will need accurate second charge quotes. Indeed, choosing a partner that lacks the accuracy or capacity to deliver in this area will throw up some far-reaching challenges.
The first consequence will be the intermediary’s workload. Systems need to be integrated with credit agencies that can carry out the credit check to determine the client’s status and their ability to secure a second charge loan. Inaccurate quotes can lead to cascading higher rates, which will probably lead the intermediary to call other loan specialists for further quotes, perhaps to find they are inundated with similar requests without the system or resource to provide information.
An inaccurate quote also means the case will need to be reworked at a later date, which will move the decision about product choice further away. Can the intermediary truly trust their quote? What about where the recommendation is based on a fine margin? Needing multiple quotes but still having concerns about their accuracy could mean the intermediary has to unpick the deal to check whether a second charge really is appropriate or is simply another one of those where a remortgage works best. Credibility and efficiency will go out of the window.
Having to seek multiple quotes will also have repercussions for those supplying them. Could systems be brought down by the sheer weight of quote demand? How might this impact the industry’s credibility, especially when the new regulation demands a quality customer journey and outcome?
The delivery of accurate, credit-checked second charge quotes is so fundamental to a successful transition for the sector that the bigger players (for example, networks) that have already nailed their colours to a particular partner’s mast may, at this point, be thinking seriously about reviewing their decision.
The ability to deal with the new regulation and deliver the correct service for clients will stand on the accuracy of quotes. Few partners are in a position to cope with the demand, so intermediaries would be wise to seek out those who can.
Steve Harness is commercial director of The Loans Engine