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Do you expect to see less or more second charge mortgage lenders in 2018?

Majority predict market retraction due to FCA mortgage rules

Majority predict market retraction due to FCA mortgage rules

A recent poll conducted by Loan Talk revealed that 47 per cent predict a dramatic retraction of business levels in the second charge market if it becomes governed by FCA mortgage rules.

The latest Loan Talk poll asked our readers their predictions on the activity within second charge industry if it did in fact become governed by FCA mortgage rules as proposed a few weeks ago. The majority, which stood at 47.36 per cent of the vote, predicted that business levels would retract dramatically.

Predictions that business levels would slow and then would return to rising came close second at 31.57 per cent. Only 10.52 per cent voted that “nothing too dramatic” would happen.

No one predicted that business levels would only drop a little.

Commenting on the results, Steve Walker of Promise Solutions said: “It seems inevitable that, as we move to full regulation of second charge lending by the FCA in 2016, the process of selling and processing secured loans will become more cumbersome for brokers and customers.

“Fewer borrowers will qualify for a secured loan so conversion rates will suffer and some distributers may consolidate or drop out of the market as margins get tighter.

“Whilst this may point to a reduction in business levels, these factors are likely to be offset by the regulatory push to get mortgage brokers transacting secured loans in a fair and consistent manner. We recently asked one of our introducers why his secured loan business had increased six fold. He told us it was because he was ‘now doing it properly’."

“I think any significant down turn in the market as a result of FCA regulation will be offset by the growth of the sector as a whole.”

Murray Ewing from Blimey! Loans agreed, saying: “Business levels may drop initially however I feel that this will not be too dramatic and the industry overall will become more robust as a result of FCA regulation which will subsequently see an increase in business.”

Steve Harness, Commercial Director, at The Loans Engine said: “We believe their approach will tighten if the Financial Conduct Authority applies the mortgage rules to second charges. Although business levels may slow at first The Loans Engine is confident that it could lead to a dramatic rise in business in the long run.”

Paul Woodworth of Gateway to Finance believes any change is likely to cause short term reductions as brokers adapt to the changes but feels business leaders in the industry are resourceful enough to manage the change effectively.  He said: “I think that people within the industry will be nervous as firms apply for authorisation and have to undergo a robust due diligence process and in many cases have to re-engineer their existing processes,” he said.

“This will lead to a down turn in business levels as the industry focuses on getting the regulated and less on acquisition. As always, we will come through the other side and in my view much stronger from the experience."

“Overall I think the FCA regulation will result in the industry becoming more professional with higher standards in place across all business functions."

“The FCA will also provide barriers to entry as the cost of starting a business plus the level of expertise required to operate will make it difficult for small start-ups."

“This again is a great improvement as under the old OFT regime anyone with little knowledge or experience could obtain a license and trade as a secured loan broker.”

The overall consensus from experts in the industry to potential changes in the market appears to be a short term loss but a much better long term future for the industry. 

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