Loan Talk spoke to Nicola Mooney who predicts that more lenders could be encouraged to enter the seconds market post MCD...

What does your role consist of and what is your past experience?

I have been at Freedom Finance since 2003. I started on the phones as a loans officer and have progressed throughout the years. After taking some time out to travel, I became the group’s Operations Manager in 2014 and recently took on the role of heading up the whole of the second mortgages department, which includes any intermediary-introduced business via The Lending Wizard.  At the moment, I am heavily involved in working towards the Mortgage Credit Directive (MCD) and also setting up a business brokerage for SMEs.

How do you think MCD will affect the second charge mortgage industry over the next few years?

The MCD applies to both first and second charge mortgages; it has been created to protect and inform customers who are thinking about purchasing a property or taking out a loan secured against their home. Second charge mortgages have traditionally been overlooked as a lending option, but as the regulatory framework develops, this option will move further into the mainstream mortgage market.

What are your predictions for the second charge mortgage industry in 2016?

The industry has embarked on the next phase of transformation and is largely being driven by customers’ behaviours and needs. The increased regulation, which comes into effect in March 2016, will have spurred many brokers and lenders to prepare for the changes ahead, because a lack of knowledge or a limited amount of products on offer could risk damaging client relationships or losing them to competitors. Come next year, consumers will be looking to providers who are prepared to offer regulated advice on what is set to be an increasingly popular loan offer. With a fresh approach, advisers will be able to attract customers looking for more flexible options for further borrowing and, by offering new products, will have the ability to provide better outcomes for both new and existing customers. 

What would you ban in the seconds market?

Any negativity surrounding second change mortgages usually stems from the fact that brokers have traditionally been reluctant to offer secured lending as an alternative to re-mortgaging products. This could be due to nervousness about the compliance implications or the absence of broker training and education in this area. However, now that all forms of secured lending will fall under the FCA umbrella, brokers will need to advise their customers that second charge mortgages might be a more suitable option alongside other products.

What innovations would you like to see launched in the seconds market next year?

It would be great to see better products for unique cases such as self-employed applicants and victims of circumstance who are currently not well served by lenders. Customers with low credit scores or adverse credit histories tend to fall outside of conventional credit scoring models and can be affected by discriminating rates or simply rejected for loans. This is something we are seeing more of due to the credit crunch, and these people need our support in their quest to repair their credit.

Do you expect to see more or fewer lenders in the seconds market in 2016?

I certainly don’t expect to see fewer. Having personally spoken to many lenders in this field, all of them seem in good shape and are ready for the changes that lie ahead. I believe that the MCD will cause an increase in the number of second charge mortgages being sold, which could result in more competition between existing lenders and also encourage new lenders to enter the market.

What is the most exciting case you have dealt with at Freedom Finance?

The most exciting cases are the ones where we manage to place our customers with a lender that takes a common sense approach to lending. In cases like these, a customer may have previously been rejected by other lenders due to strict lending criteria and tough automated processing systems. Although technology is essential for delivering smooth processes and coping with regulatory changes, the human touch is just as important. Lenders and brokers should always maintain a customer-centric focus, consider all the options available, and find a loan that is most suitable to the consumer’s individual financial circumstances.

What developments can we expect to see from Freedom Finance next year?

At the moment, we are mainly seen as an unsecured and secured loan brokerage, but we are diversifying and growing all the time, and have a clear strategy to become a leading player both in the consumer and intermediary markets. Our product offering is growing consistently, especially around alternative products such as bridging loans, business loans, commercial loans and asset finance. If a customer has a lending requirement, we want to be able to source that loan for them.

What are the implications for brokers who do not keep up-to-date with products available in the second charge mortgage market?

Brokers may find they are at a disadvantage if they market the benefits of second charge mortgages but don’t actually offer the product. Savvy consumers now have access to an incredible amount of information when deciding on the best products for them, so if a broker doesn’t have these products on offer, they could end up pushing their clients into the arms of a competitor. They may also get left behind if they are not fully aware of the opportunities that exist in the market, the products that are needed to address these opportunities and the level of income that can be generated as a result.

Do you think broker distribution will change due to MCD? And if so, how?

Possibly. I believe that shortly after the implementation of MCD, intermediaries will want to work with master brokers to place their customers. However, as they become comfortable with second charge mortgages and confidence starts to build within the market, some intermediaries may think about going direct to a lender. Currently, lenders do not allow intermediaries to do this, as they believe that the use of a master broker such as ourselves is essential.