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Second Charge Market

Second Charge Market

I’d like to begin this article, if you’ll allow me, to recount a tale of a swimming instructor who was trying to teach a child to swim. The child was attending all of the lessons and no one could claim that they weren’t trying their best but for some reason it just wasn’t happening. Despite the best efforts of both child and teacher this youngster seemed destined to be a non-swimmer. Finally, when all hope was lost the teacher spotted where they had been going wrong. The child was swimming with his fingers wide open, thus allowing the water through his hands and preventing him from making any headway. As soon as this issue was rectified the kid was a natural.

You may wonder what this story has to do with the mortgage market and, on the face of it, I’ll grant you not a lot. However, what it does illustrate is how one small issue in the manner a task is executed can be the difference between success and failure and, this I think, is something that is at play in the second charge market at present.

There’s no denying that more mortgage brokers are aware of second charge products than five or so years ago. Thanks to MCD and the tireless work of those in the seconds industry in educating the sector awareness has increased and so too are lending figures. But I think we can all agree that take up has not been as significant as one would have hoped. One reason for this, just like with the struggling swimmer, is how some brokers approach the task.

The point here is that seconds are often considered too late in the process – post fact find when a problem arises. A better approach is surely to assess eligibility for a secured loan at the outset where opportunities are most abundant. Then decide if it is suitable.

But if brokers are not “tuned in” to second charges and are not familiar with the criteria too many could be making their minds up in that initial conversation and “binning” perfectly good business, which incidentally is virtually guaranteed to become repeat business.

Most brokers will see a client looking to raise capital and, perhaps subconsciously decide a remortgage is the way forward. In many cases it will be and, as brokers have been offering remortgages for the entirety of their careers, it’s only natural that this may be the approach they take. However, too often – perhaps because of a clients credit history, age, purpose of loan or other factor, the broker politely sends them on their way.

This is understandable. Nobody wants to be a busy fool so if the broker has already decided he can’t help the client with a remortgage then he’s unlikely to go through the time consuming task of conducting a fact find.

One has to wonder if compliance may be hampering rather than helping. If a client passes those informal “kick out” questions at the outset, the broker is then in to a structured process which includes evidencing and justifying every decision or recommendation. No wonder they want to side step the obvious no hope cases and save themselves some unnecessary and unprofitable paperwork.

Again, don’t get me wrong, there are certainly some very good brokers who have a good understanding of the second charge market and as such will be considering both options from the start. But if those kick out questions are now out of date and don’t reflect the current market the broker is not doing himself or his clients any favours

It’s important to perfect your sale process in order to ensure you’re not missing out on lucrative business. Having a preconceived idea based on what you’re used to selling or what you’re most comfortable offering is counter-productive and will cost you completions in the short term and repeat business in the long term.

Start with a blank page and try not to prejudge. If it seems likely that a remortgage is the right option after all you’ve lost nothing by going in with an open mind. If not you’ll already have seconds as an option in your mind and will be able to refer the client to the appropriate partner firm and earn a commission while doing so.

And because you were able to help that customer rather than turning them away you have secured a client for life – meaning there’ll be plenty of opportunity or future mortgage and protection business.

So do what you need to do to get yourself clued up on seconds – whether that be attending training seminars or just having an underwriter on the end of a phone to run potential cases past. There are more opportunities where the funnel is widest and dealing with them more effectively will reap rewards. It’s all in the approach.

www.promisemoney.co.uk

01902 585052

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2 out of 3 borrowers get a lower rate than our representative example of a regulated secured loan below:

Mortgages and Remortgages

Representative example

£80,000 over 240 months at an APRC OF 4.3% and a discounted variable annual interest rate for two years of 2.12% at £408.99 per month followed by 36 payments of £475.59 and 180 payments of £509.44. The total charge for credit is £39,873 which includes a £995 broker / processing fee and £125 application fee. Total repayable £119,873.

Secured / Second Charge Loans

Representative example

£63,000 over 228 months at an APRC OF 6.1% and an annual interest rate of 5.39% (Fixed for five years – variable thereafter) would be £463.09 per month, total charge for credit is £42,584.52 which includes a £2,690 broker / processing fee. Total repayable £105,584.52.

Unsecured Loans

Representative example

£4,000 over 36 months at an APR OF 49.9% (fixed) and an annual interest rate of 49.9% would be £216.21, total charge for credit is £3,783.56. Total repayable £7,783.56.


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.


If you have been introduced to Promise Money by a third party / affiliate, Promise may pay them a share of any fees or commission it earns. Written terms available on request. Loans are subject to affordability status and available to UK residents aged 18 or over. Promise Money is a trading style of Promise Solutions Ltd. Promise Solutions is a broker offering products which represent the whole of the specialist second mortgage market and is authorised and regulated by the Financial Conduct Authority – Number 681423.

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