As second charge lending settles at £70m a month, the sector should become more comfortable with itself and better known
Recent figures from the Finance & Leasing Association show that the second charge market has settled at around £70m of lending a month following the introduction of the Mortgage Credit Directive.
We should now expect a sector more comfortable with itself and becoming far better known, particularly among intermediaries, many of whom may never have engaged with it before.
The regulatory changes were a natural progression and ultimately should take seconds to the next level, resulting in greater interest and more business being written.
The FLA figures show the first inkling of a move towards these goals. The sector hit £73m of completions in August, up by 6 per cent for both value and volume from the same period a year previously. Furthermore, lending reached £889m for the 12 months to August, up 17 per cent on the previous 12-month period.
The figures themselves are not broken down but I suspect the intermediary side of the market is taking a larger share of business than direct-to-consumer, especially given the educational campaigns that have been ongoing throughout this year and the fact it is the intermediary sector that is driving market growth.
Plus, of course, the market seems to be swinging towards remortgage opportunities, given that purchase transactions have fallen as a result of a number of measures, not least the rise in stamp duty for additional properties. The outcome of the EU referendum and the subsequent cut to base rate have further fuelled the remortgaging/capital-raising trend.
That said, other regulatory changes, most notably the MMR, appear to have resulted in an increase in mortgage prisoners. Add to this the fact that many borrowers do not wish to disturb their current mortgage arrangements, especially where they have an attractive existing first charge deal.
What is positive in all of this, however, is the first charge market’s engagement with second charge products, the solutions they provide and the master brokers and packagers able to get clients the best deals.
The fact that intermediaries must now point out to clients that a second charge could be a more appropriate option for those seeking to raise capital is a major leap towards the level playing field we are all seeking.
Looking ahead, while the future is of course uncertain, we should be able to have some faith in a marketplace where seconds continue to make major strides.
We have found new confidence in our dealings with intermediaries. It is all about finding your own way in the market: being comfortable with the path chosen, the regulatory responsibilities it brings and your ability to provide the right product for your client.
We must try to move the second charge sector to a place much more in keeping with first charge activity, particularly with a fee the customer can relate to.
If the second charge market looked more like the norm, fewer intermediaries would have a reason not to engage with it. The aforementioned FLA figures, as well as our own data, go some way to proving this is producing positive results.
Work must continue to keep this going in the right direction.
Steve Harness is commercial director of The Loans Engine