Mortgages  

Second charge growth continues after FCA concerns

Second charge growth continues after FCA concerns

The second charge mortgage market continued to grow in August despite concerns from the Financial Conduct Authority about lending practices.

Figures released today (5 October) by the Finance and Leasing Association (FLA) found the second charge market grew by 6 percentage points in August with 2,100 new agreements.

But despite a rise in volume, the value of new business in the second charge market dropped by 2 percentage points in August to £92m.

On a yearly basis, in the 12 months to August, second charge grew in both volume and value - with new business sitting at more than £1bn, up 2 percentage points on the previous year, and the number on new agreements growing by 3 percentage points to 22,356. 

Geraldine Kilkelly, head of research and chief economist at the FLA, said the second charge market had reported new business growth in six out of eight months so far in 2018.

She said: "With the number of new agreements in this market up by 3 per cent in the first eight months of 2018, we continue to expect single-digit growth in 2018 as a whole."

Earlier this year, the FCA found "significant issues" in the second charge lending market and told all firms providing the service to review their processes.

In its review, the FCA found it could prove difficult to follow how a lender had carried out affordability stress testing and it found practices which could leave second charge lenders vulnerable to becoming involved in financial crime.

Daniel Yeo, managing director at Cardiff Money, said the FCA's review of the second charge market was welcomed by most quarters, including himself. 

He said: "It is forcing the industry in to new waters and maturing us across the board."

Mr Yeo said any negative impact on lenders was only short term. 

He said: "Lenders are understandably tightening up on certain areas, which is a bit of a culture shock in terms of processing applications for the packagers providing them with the business.

"But long term it ensures an industry which only has players who can cope with increased protocol and compliance requirements.

"Change is good, like Darwin said 'only the strongest survive', so evolve or move aside."

rachel.addison@ft.com