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SECOND CHARGES – NOT JUST A TICK BOX EXERCISE

By Bradley Moore

It is almost six months since the Mortgage Credit Directive (MCD) brought second charge mortgages to the masses, master brokers have spent years waxing lyrical about the sector’s merits with some success but with the regulator firmly behind us the final piece of the jigsaw has been completed.

Many advisers will look back and ask themselves how it was that they worked as a mortgage adviser for all of those years without giving second charges a second glance. Sadly however there are many that still just do not understand where a second charge can work for their clients and you could say remain uninterested. Some even go as far as to making an enquiry but have dismissed the second charge before they have even had the results back. This appears to be because they are set in their ways and seemingly refinancing through a remortgage is the answer to everything, something we do not purport second charges to be. This shows that we clearly still have some work to do.

The good news is that there has been a definite uplift in both the number of enquiries for second charges and the number of completions. Clearly some of those enquiries will be for cases that would not have taken this route previously. We still have a very long way to go to fulfil the objectives of the MCD, so that a second charge mortgage is compared to a first charge remortgage on an equal footing on every capital raising transaction, but the journey has definitely begun and we, and others, will continue to work hard to educate anyone who is willing to listen to us, because we firmly believe that knowledge of the sector will assist mortgage advisers in their own businesses and help them to retain more customers.

It would be foolish to expect consumers to be fully aware of the changes and be actively searching for a second charge mortgage. Yes this happens online but it can be hard for borrowers to find the information that they need, it doesn’t help that most mortgage intermediary’s websites don’t even mention second charges. This would suggest that many firms have a lack of knowledge or confidence in this market. It also means that the services of a specialist master broker are even more essential for them to remain both compliant and compelling as they compete with other firms for customers’ interests. I believe the key here is continuing to break down any preconceived negativity about the sector from our intermediary communities.

A great starting point is for advisers to add questions about second charge mortgages into their own fact finds; failing that, if you set up your appointment lines of questioning around a remortgage and a remortgage only, then surprise, surprise, the result you get and the advice you give will probably be to remortgage. Good advisers will be open to all possibilities and will leave no stone unturned to ensure that the ultimate recommendation is true best advice and covers all available options.

We at Brightstar have seen a significant increase in the number of applications that have converted to completions for the clients that have been introduced to us. I feel that this is achieved because our fact finding is thorough and we invest the required time at the outset into establishing exactly what the needs of the borrower are and how best to match them, whilst ensuring that they are not confused with jargon. A thorough fact find conducted in this way means that if and when a client does take a second charge mortgage that they completely understand what they have taken and why and how it compares to the alternatives. The sector is in rude health, I believe it has been spoken about more than any other specialist area in 2016 and there is no reason for that not to continue. What we need now is a way for it to spread to the consciousness of the people who are not yet engaged and have not yet realised how second charges are of value to a significant proportion of their clients.

While l recognise that it is always a challenge to change the way you do things, especially if you have been doing things a certain way for a long time, everyone needs to move with the times or let those around you act quicker and be left behind.