At Brightstar we recently carried out some research among a group of more than 1,000 brokers.
We asked how many of them mentioned to their clients that they offered second charge mortgages at the time they were working on the purchase or remortgage, or indeed at any point during the term of their product.
The result was startling, although perhaps unsurprising – 74 per cent admitted they did not talk about second charge mortgages at any stage.
It’s now more than four years since second charge mortgage lending came under regulation of the Financial Conduct Authority (FCA) alongside the first charge market, and brokers have been required to consider second charges alongside other options for capital raising.
So, the fact that three quarters of brokers do not mention second charges is certainly startling.
It’s not surprising, however, as this research merely supports the anecdotal evidence we hear, day in, day out.
A second charge mortgage will not be the right option for everyone, but it will be the right option for some, and if it is not being discussed, there will be some clients who end up with a product that is not the most suitable solution for their needs.
So, what is the answer?
The first response is to call for more education about second charge lending. This certainly has its place and there will always be opportunity to make brokers aware of the features and uses of a product they may not have previously realised.
However, the most common reason given by brokers for not talking about second charge mortgages was not that they didn’t have the right knowledge but that they did not have the time, or simply forgot.
It seems then, that if we are going to put second charge lending on a level playing field with the other options when it comes to capital raising, then it needs to be a case of changing behaviours.
Behavioural change does not happen overnight, or on its own, but it can be designed.
There is actually a joint research initiative between Cambridge University and Bristol University that studies how altering cues in our immediate physical environments can change behaviour.
This is sometimes known as choice architecture or nudging and it’s being studied with a view to promoting healthier lifestyles – but it can also promote healthier businesses.
Unless you are one of the 26 per cent of brokers who do talk about second charge mortgages, you could take this approach to changing behaviours in your business and promoting a more inclusive advice process.
It could be as simple as putting some prompts around the office or could include updating sales scripts or CRM systems.
Whatever approach you choose to take, it’s time to design a new conversation when it comes to second charge lending.
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Source: Mortgage Solutions