The second charge market which has achieved year-on-year growth since 2011, is on course to lend up to £750 million this year and will undoubtedly continue to face new challenges and opportunities in 2016 and beyond.
The final countdown
As a result of the MCD deadline next March, the second charge market will be brought in to line with mainstream mortgages, and I believe this is a positive step in improving the credibility of the sector. In addition, increased scrutiny from the regulator will help to drive even more positive customer outcomes, providing even greater incentive for intermediaries to consider second charges alongside first charge products. In order to meet this demand, some intermediaries may look to set up their own second charge mortgage broking teams within their business, but this will involve significant investment of both their time and money.
The value of experience
A preferable option to starting from scratch is to develop a strong relationship with a master broker that has a depth of experience in second charge mortgages. In this industry where relationships and quality of service are imperative, experience also plays an extremely important role. There will always be a need for specialists with expertise in the second charge sector that have a proven track record and can provide additional services to help improve the advice process.
It will be a major change for those intermediaries who are currently unaware of the benefits of second charge products and who have, up to this point, given these loans a wide berth. The regulatory changes also means that from the 21st March 2016, firms will need relevant mortgage permissions if they wish to arrange, advise on, enter into or administer second charges. However, if they choose not to, they will be unable to write business in this area; it is certainly going to be a real learning curve.
A changing landscape
Although the final picture is unknown, it is clear that the sector will continue to pose new challenges. We can expect to see a change in criteria as well as new propositions and products from lenders, and with more lenders set to join the marketplace, the second charge landscape will likely become even more competitive.
The market’s prospects for future growth certainly look promising and I foresee the second charge market being one of the largest growth areas in the next few years. As confidence grows and relationships are built, passing a client to a third party for advice will become second nature for intermediaries. In addition, a greater demand for second charge products will create the need for specialist knowledge and to be truly ‘whole of market’, intermediaries should look to include second charges in their scope of service if they aren’t willing to refer to ensure they offer the most suitable option for the client.