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

2017 predictions: 'We can maybe see at least one big packager leaving the industry'


Lenders diversifying, new entrants and an increase in second charge familiarity are just three of a number of predictions for the market made by the industry.

To mark the start of the new calendar year, Loan Talk asked second charge industry experts for their predictions for the market over the next 12 months.

Predictions centred around the firms operating in the second charge space, the size of the market and outside influences such as the possible Brexit impact. 

“We can maybe see at least one big packager leaving the industry”

Martin Stewart, director at London Money, made a fairly bold prediction for the seconds market and those who operate within it.

“We can maybe see at least one big packager leaving the industry as the market is a totally different animal to what it was 12 months ago.

“The Mortgage Credit Directive was the tide that went out and we are now all inspecting each other’s budgie smugglers and it’s not a pretty sight.”

Towards the end of last year V Loans announced it would be pulling out of the second charge mortgage and bridging market. 

Martin felt that overheads would play a major role within the industry as firms could no longer build business models on the expectations of 12.5% fees.

“There will be a race to the bottom and the trick will be to get there as soon as possible without compromising service to the broker or the consumer.

“The new entrants will be thimble models built around low overheads and quality service.”

“The directly authorised brokers have been too subservient to the big players for too long and we will help encourage and motivate the brokers to realise that actually they hold all the cards and the industry needs to dance to their tune and not the other way around.”

Will the £1bn mark be broken in 2017?

Rob Derry, managing director at Brunel Mortgages and Loans, predicted that there would still be a continued period of seconds bedding in with regards to the Financial Conduct Authority’s mortgage regime.

“However, I think more and more brokers will become familiar with the benefits of seconds, so they will be more comfortable using them and recommending them to their clients.

“It has to happen because no one in the industry wants to see complaints against advisers for recommending a remortgage when a second mortgage would have been [the] best advice.”

The Finance & Leasing Association revealed in December that £71m of new second charge mortgages took place in October, a fall of 15% on 2015's results. 

However, Sam Kirtikar, managing director of Clever Lending, felt that the industry was creeping back to the £1bn mark, which he believed would be broken in 2017.

"As remortgage activity will form the vast majority of most intermediary business, this will drive second charge enquires as not all will fit into the remortgage slot.

“I believe that home improvements will continue to grow, but more importantly, more intermediaries will start to embrace second charges as the correct lending solution and offer price-competitive products for their clients borrowing requirements."

“Regulatory changes will not be as drastic as in recent times”

Sebastian Riemann of Libra Financial Planning predicted 2017 would offer a host of opportunities and looked at possible changes in regulation.

“Regulatory changes will not be as drastic as in recent times, although the recent changes are still bedding in and will start to take shape in the coming months with the buy-to-let tax changes and lending criteria coming into effect.

“This is likely to keep interest rates low, in fact it’s extremely unlikely that these will change before 2020, but the uncertainty will inject urgency into the markets.

“Many will be concerned about the effects, so a lot of focus on fixed rates for both first and second charge lending is to be expected.

“With the added benefit that second charge fixed rates often come without early repayment charges we are likely to witness an ever-increasing demand for this sector, even if on the face of it the costs are slightly higher.”

Lack of Brexit impact a positive for those seeking second charge finance

Tony Marshall, managing director of Equifinance, focused on the impact Brexit was likely to have on those thinking of using second charge mortgage finance.

"The recession predicted by most economists as a result of the Brexit vote does not appear to have materialised as yet and according to most reports [it] is unlikely to appear soon as all indicators show a slow but definite period of growth.

“This is good news for homeowners seeking second charge finance as a prolonged period of economic growth and financial stability can only help in this regard. 

"The recent Nationwide House Price Index indicates that there will be a continued slowdown in London house price growth and continued growth in the remainder of the UK.

“This will see many people able to benefit from house equity growth, which is good news for homeowners across the country."

The market is ripe for banks

Martin concluded by looking at whether any lenders would enter or even exit the market during 2017.

“I can’t see any lenders exiting the market.

“However, as it has become saturated with the same kind of products, I would expect and hope to see certain lenders diversify and spend more time looking at the niche areas.

“The market is ripe for banks to set out their stall and gain ground [as] it will only be a growing market in 2017.” 

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