Mortgages  

Eight out of 10 brokers to offer second charge

Eight out of 10 brokers to offer second charge

Legal & General Mortgage Club has revealed 84 per cent of brokers plan to include second charge loans in their advice process this year, following the Mortgage Credit Directive’s rule changes.

Legal & General interviewed more than 200 adviser attendees at its recent spring events and 32 per cent of respondents said they would write second charge mortgages themselves, while more than half would refer the cases to a master broker.

The research also found London will soon see the largest increase in brokers writing second charges themselves, with 41 per cent expecting to do so.

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The Mortgage Credit Directive requires brokers to mention the option of second charge loans to customers looking to extend their borrowing.

For brokers wanting to describe themselves as ‘independent’, they must also include second charge within the scope of their service.

Last autumn, the Financial Conduct Authority warned brokers to get ready for the EU directive by applying early to be second charge, or risk losing their independent status.

At that stage, just three advisory firms had been given authorisation by the FCA, with another five brokers in the process of applying for full authorisation and a further eight in the process of applying for the lending authorisation.

Jeremy Duncombe, director at L&G’s Mortgage Club, said while it is good to see brokers taking advantage of these opportunities for new business, it is also important they look to “futureproof” themselves against any further changes that could challenge their hold on the market.

“Intermediaries should look to offer a holistic advisory service, from mortgages and secured loans to equity release and insurance.

“At the same time, advisers should also look to their back-books for business opportunities, where they can advise exiting customers on their options for remortgaging and ensure the products they have still suit their current circumstances.”

The mortgage club launched a direct to lender proposition for second charge loans earlier this month. Back in January, secured lending broker V Loans also launched an MCD-ready second charge advisory service.

Ray Boulger, senior technical manager at John Charcol, said it was a “serious concern” that only 84 per cent of brokers intend to comply with new FCA rules, which have been known about for more than two years, “especially as even before these new regulations it was good practice to understand when a second charge might be best advice”.

He noted there is a commercial decision for brokers to make when they identify a second charge might be suitable, in terms of whether to provide advice on which specific second charge to recommend, or whether to outsource this advice.

“I would strongly recommend the 16 per cent of brokers who appear to be currently breaching FCA rules to recognise their obligations,” added Mr Boulger.

peter.walker@ft.com