It’s been a key question in the mortgage industry since the Mortgage Credit Directive (MCD) was introduced (and, by rights, should have been a topic of discussion much earlier) - are mortgage brokers as engaged with second charge products as they should be?
Since the new regulation came into effect in 2016, the message has been clear: brokers should be viewing seconds in exactly the same way as firsts.
A second charge mortgage should be given just as much consideration as a remortgage when assessing a client's needs and the right solution should be based on which is more suitable.
Of course, just because that’s the way it should be doesn’t necessarily mean that’s the way it is.
The vast majority of players in the second charge arena would agree that, for the most part, mortgage brokers just aren’t engaging with seconds as much as they could, or should.
Therefore, the results of a recent survey by SimplyBiz were very surprising and revealed only 15 per cent of mortgage brokers are not involved in the second charge market at all.
How can this be? How can a massive 85 per cent of mortgage brokers be engaging with the secured loan market when those of us operating in it are seeing no real evidence of this?
The answer, I expect, lies in the word ‘involved’.
The evidence on the ground suggests most mortgage brokers, while ticking a box to say they offer seconds, are not actually offering them consistently.The problem is we have no concrete definition of what is meant by "involved in the second charge market".
Are we talking about mortgage brokers giving due consideration to a second charge loan each time they see a client looking to raise funds? Assessing the clients’ needs, current mortgage, circumstances and additional requirements before deciding whether a remortgage, further advance or second charge is the best option?
Or, more likely, by "involved" do we simply mean a broker will consider a second only if there is no possible way of doing a remortgage and, therefore, a second charge won’t even come into the conversation unless the remortgage can’t be done?
The fact is, if seconds were being given as much consideration as first charges, the lending figures would be considerably higher.
The evidence on the ground suggests most mortgage brokers, while ticking a box to say they offer seconds, are not actually offering them consistently but rather, still seeing them as a last resort if at all.
With such a misunderstanding of the advice process, it's hardly surprising brokers struggle to properly incorporate seconds into their business.
The frustrating thing is, if brokers were to offer seconds in line with first charges, the benefits for their business would be tangible.
As consumer awareness of seconds grows, thanks to the work of the industry, we will get to a point where more clients are actively seeking out the product.
If brokers are not able to offer them or not making it known that they can, these clients will be lost to comparison sites and end up with another broker who will probably pick up future remortgage business and try to churn any previously sold protection products.
For us to really get to a point where we can claim 85 per cent of brokers are embracing second charges, we need a more consistent approach.
Steve Walker is managing director of Promise Specialist Lending
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