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Engaging with second charges?

Engaging with second charges?

It’s been a key question in the mortgage industry since MCD was introduced (and, by rights, should have been a topic of discussion much earlier) – are mortgage brokers as engaged with second charge products as they should be?

Since the new regulation came into effect in 2016 the message has been clear. Brokers should be viewing seconds in exactly the same way as firsts. A second charge mortgage should be given just as much consideration as a remortgage when assessing a client’s needs and the right solution should be based on which is more suitable.

Of course, just because that’s the way it should be doesn’t necessarily mean that’s the way it is. The vast majority of players in the second charge arena would agree that for the most part mortgage brokers just aren’t engaging with seconds as much as they could, or should.

Therefore, the results of a recent survey by SimplyBiz were very surprising and revealed only 15% of mortgage broker are not involved in the second charge market at all.

How can this be? How can a massive 85% of mortgage brokers be engaging with the secured loan market when those of us operating in it are seeing no real evidence of this. The answer, I expect, lies in the word ‘involved’.

The problem is we have no concrete definition of what is meant by ‘involved in the second charge market’. Are we talking about mortgage brokers giving due consideration to a second charge loan each time they see a client looking to raise funds? Assessing the clients’ needs, current mortgage, circumstances and additional requirements before deciding whether a remortgage, further advance or second charge is the best option?

Or, more likely, by ‘involved’ do we simply mean a broker will consider a second only if there is no possible way of doing a remortgage and, therefore, a second charge won’t even come into the conversation unless the remortgage can’t be done?

The fact is, if seconds were being given as much consideration as first charges, the lending figures would be considerably higher. The evidence on the ground suggests most mortgage brokers, whilst ticking a box to say they offer seconds, are not actually offering them consistently but rather, still seeing them as a last resort if at all.

Even a “second charge industry expert” was quoted this month in print saying “The roll call needs to be further advance, remortgage and then a second charge and only if neither of the other two are viable” With such a misunderstanding of the advice process its hardly surprising brokers struggle to properly incorporate seconds in their business.

The frustrating thing is, if brokers were to offer seconds in line with first charges the benefits for their business would be tangible. As consumer awareness of seconds grows, thanks to the work of the industry, we will get to a point where more clients are actively seeking out the product. If brokers are not able to offer them or not making it known that they can, these clients will be lost to comparison sites and end up with another broker who will probably pick up future remortgage business and try to churn any previously sold protection products.

For us to really get to a point where we can claim 85% of brokers are embracing second charges we need a more consistent approach.

www.promisemoney.co.uk

01902 585052


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    More than 50% of borrowers receive offers better than our representative examples. The %APR rate you will be offered is dependent on your personal circumstances.
    Mortgages and Remortgages secured on land
    Borrow £270,000 over 300 months at 7.1% APRC representative at a fixed rate of 4.79% for 60 months at £1,539.39 per month and thereafter 240 instalments of £2050.55 at 8.49% or the lender’s current variable rate at the time. The total charge for credit is £317807.66 which includes £2,500 advice / processing fees and £125 application fee. Total repayable £587,807.66
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    Promise Money is a broker not a lender. Therefore we offer lenders representing the whole of market for mortgages, secured loans, bridging finance, commercial mortgages and development finance. These loans are secured on property and subject to the borrowers status.

    More than 50% of borrowers receive offers better than our representative examples

    The %APR rate you will be offered is dependent on your personal circumstances.

    Mortgages and Remortgages

    Representative example

    Borrow £270,000 over 300 months at 7.1% APRC representative at a fixed rate of 4.79% for 60 months at £1,539.39 per month and thereafter 240 instalments of £2050.55 at 8.49% or the lender’s current variable rate at the time. The total charge for credit is £317,807.66 which includes £2,500 advice / processing fees and £125 application fee. Total repayable £587,807.66

    Secured / Second Charge Loans

    Representative example

    Borrow £62,000 over 180 months at 9.9% APRC representative at a fixed rate of 7.85% for 60 months at £622.09 per month and thereafter 120 instalments of £667.54 at 9.49% or the lender’s current variable rate at the time. The total charge for credit is £55,730.20 which includes £2,660 advice / processing fees and £125 application fee. Total repayable £117,730.20

    Unsecured Loans

    Representative example

    Annual Interest Rate (fixed) is 49.7% p.a. with a Representative 49.7% APR, based on borrowing £5,000 and repaying this over 36 monthly repayments. Monthly repayment is £243.57 with a total amount repayable of £8,768.52 which includes the total interest repayable of £3,768.52.


    THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME

    REPAYING YOUR DEBTS OVER A LONGER PERIOD CAN REDUCE YOUR PAYMENTS BUT COULD INCREASE THE TOTAL INTEREST YOU PAY. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR ANY OTHER DEBT SECURED ON IT.


    Promise Money is a trading style of Promise Solutions Ltd – Company number 04822774
    Promise Solutions, Fullard House, Neachells Lane, Wolverhampton, WV11 3QG

    Authorised and regulated by the Financial Conduct Authority – Number 681423
    The Financial Conduct Authority does not regulate some forms of commercial / buy-to-let mortgages

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