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Where are the opportunities in second charge lending?


James Briggs

When I sat down to put this blog together, I didn’t want to write yet another article about why customers should consider seconds (protecting their current rate, avoiding an early repayment charge, maintaining their interest-only first charge etc).

While these are certainly important factors, they’ve already been covered by several of my industry colleagues.

Instead, I’ve come up with three areas where I think the second charge lending market needs to improve to avoid reaching what industry commentators call the ‘plateau state’.

1.    Product: As an industry, we should continue to innovate. Recent income-assisted changes to buy-to-let second charges, for example, have been praised by brokers struggling to capital raise for prime customers due to PRA rules. For me, this is where the product opportunity lies. 

2.    Education: I read all the time on social media that there needs to be more second charge education for the broker market. This is true and many master brokers and certain lenders do a very good job in spreading the message to the adviser community. However, people have to want to be educated. There are too many firms simply excluding second charge lending from their scope of service. This may be acceptable from a compliance point of view, but it limits customers’ options (via their chosen broker) and could lead to the most cost-effective option never being presented. We need to find the root cause for this non-engagement and demonstrate, as an industry, just how valuable and effective second charge lending can be. 

3.    Distribution: This is an area where I feel the second charge industry has moved on significantly since March 2016. DA advisers can now access products directly from lenders – as can ARs of certain networks – with the help of mortgage sourcing systems. Many master brokers offer a packaged-only service, where advisers control the advice and play a more active role in the process. Certain master brokers have seen strong growth by implementing transparent fixed-fee models. However, there is still work to be done in this area. For example, I get regular feedback from ARs claiming that their options are too limited and this drives them to steer clear of second charge lending.

The perception of second charge loans is changing. Increased confidence in the use of this product – coupled with greater customer awareness and interest – means demand has grown in the past few years. While there is no panacea which will address all the areas I’ve mentioned, it’s important the market continues to evolve, making sure it remains a viable alternative to remortgaging and something customers see the value in. 





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