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LOAN TALK: WHAT WILL THE NEW HOUSING MINISTER MEAN FOR SECOND CHARGES?

By Bradley Moore

The appointment of Gavin Barwell as the new housing minister, raises some wider questions on the focus of housing policy for this Government over the coming months and years.

It has to raise the question, what will happen to the target now and if it goes by the wayside, what does that mean for the housing market? House builders remain under pressure. There is no doubt that one million homes was always going to be a challenging target to meet, so if the government’s focus has now changed, which as yet remains unclear, the challenge of meeting this target could well have been much harder.

Even if the government decides to continue with the target, any problems faced by house builders is likely to lead to the target being delayed, making it unachievable in the timescales set.

So what does this mean for housing and second charge mortgages in particular? For housing per se it will put even more pressure on the current housing stock as the supply and demand issues remain the same. Regardless of who is in power, the population of the UK is unlikely to ever get any smaller, rather it is likely to carry on expanding much as it has done over the past twenty to thirty years. As a result, with no intervention, house prices will continue to rise, as the housing stock falls significantly short of what is required.

In the short to medium term therefore, we are likely to see much the same situation as we have seen to date with people choosing to refurbish and expand their existing property instead of moving to a bigger one.

While this may not be good news for people wanting to get on the housing ladder, it is likely to be good news for the second charge mortgage market as existing homeowners look for additional finance to enable their home expansions.

The rise in popularity of long term fixed rates will make second charge mortgages more relevant than ever as the alternative of a remortgage becomes prohibitively expensive if accompanied by a three year redemption penalty for example.

This situation will very much put brokers in the driving seat, as the people best situated to provide their clients with a realistic alternative to moving house. This will be particularly pertinent for those with an expanding family who just cannot afford to move to a larger property. While some clients will turn to their broker looking for help, others may turn first to their existing lender. As few mainstream lenders also offer second charge loans, this runs the risk of the borrower receiving either limited or poor advice, that certainly will not encompass the whole of the market.

The MCD has gone a significant way to making second charge mortgages a mainstream option. Brokers now have the opportunity to show when it provides best advice, both helping the client and potentially saving them money.