The second charge market will change significantly after the introduction of the Mortgage Credit Directive (MCD) and, as a result, the regulatory changes will drive a heightened awareness of the market. In addition, the sector will be faced with fresh challenges moving forward and, as enquiry levels increase, so will the time spent on business that does not materialise.
Therefore, to ensure the second’s market makes a smooth transition into the new world of the MCD, it must work to stay ahead of the curve by being prepared for changes in terms of practice, regulation and work capacity. These changes are imminent and it really is crunch time. I am sure there will be plenty of last minute running around but it isn’t as though we haven’t known this was coming for a long time.
It is likely that we will see a noticeable hike in enquiries as more and more brokers introduce master intermediaries to a broader community of clients which will essentially drive much higher volumes as more realise how compelling a second charge loan can be.
Suffice to say, a proportion of those enquiries will not turn into a second charge completion. However, the overall process will become much slicker with the removal of the consideration period and the introduction of a seven day reflection period which will take place at the end rather than at the beginning. This should mean that the advice process becomes the most significant part. Advisers can give it the time it deserves and, because they aren’t just form filling, timescales should actually be reduced as a result.
The increase in time spent giving advice will help to educate the consumer even further as well as serving to keep intermediaries better educated in the sector’s merits. The market has become more aligned with first charges and the advice process will be better for the consumer as a result.
In order to deal with the new regulation and keep up with an increasing number of enquiries and referrals post MCD, intermediaries will need a good process in place in order to deliver accurate quotes and the correct service for clients. If a reliable process is not in place, it is likely that some additional challenges will arise. As a result, many intermediaries may look to work with a master intermediary which will allow them to refer second charge business without detrimentally impacting their own time.
Inaccurate quotes for second charges can often lead to higher rates and could mean the case will have to be revised at a later date, which affects the industry’s credibility. Interestingly, we are still receiving calls from intermediaries who want to look into second charges, but in reality, many of them are at base level in terms of experience and knowledge. This highlights the importance of trusting experts who will do a thorough job, rather them taking it on themselves.
The early part of this year will bring with it new challenges. However, I believe these impending changes will have a positive impact on the industry and, as the directive becomes integrated into the advice process, second charge products will continue to fuse into the mainstream mortgage market.
Attributed to Bradley Moore, Director of Second Charge Loans, Brightstar