Early days
Fiona Hoyle, head of consumer and mortgage finance at the Finance and Leasing Association (FLA), says the majority of new business continues to be originated in the second charge broker market.
“However, the past 12 months have seen a slightly broader range of brokers beginning to consider second charge mortgages as an option when advising clients.
“It is still early days but this trend looks set to continue as more brokers and consumers understand how second charge mortgages can be used,” she notes.
Why do some advisers know so little about the market and is this likely to change?
Advisers’ knowledge of the second charge market is a “mixed bag”, according to Peter Williams, sales director at mortgage adviser John Charcol.
“A large number just refer to a second charge broker, some will use a packager but advise themselves and some will go direct,” he explains.
“There are still a huge amount of advisers that do not look at or consider second charges and this needs to change.”
It could be the case though that some advisers are assuming a certain level of knowledge about the market.
This is something Steve Harness, commercial director at The Loans Engine, believes is happening all too often, which is neither good for the end client or the broker/adviser.
He warns that by shunning the second charge market, many mortgage intermediaries “could be walking a dangerous path”.
“They tell us, quite rightly, that in most instances it’s cheaper to remortgage than to capital raise through a second charge. But when you ask how they evidence that a remortgage is cheaper, invariably the answer is, ‘I just know it will be’,” he says.
“This may not hold water during a compliance audit, where the general mantra remains, ‘if you don’t have the evidence, it didn’t happen, and you didn’t do the research’.”
Many in the industry believe there is still some way to go before advisers’ knowledge of the market catches up with that of master brokers.
Joshua Gerstler, financial adviser at The Orchard Practice, uses a master broker for its second charge lending.
But he suggests the fee charging structure used by many master brokers is opaque. “I would like to see more regulation in the second charge market and for the process to be as simple as arranging a first charge mortgage,” he urges.
