Main Menu Button
Login

The tides beginning to turn

Tides beginning to turn

Where is this so called second charge boom? That seems to be the question on everyone’s lips right now. Why didn’t it happen? Was broker apathy to blame? Was it all down to a lack of education? Perhaps master brokers didn’t do enough to ensure mortgage brokers understood the products on offer. Maybe there just wasn’t any consumer appetite for second charges? Perhaps we were fooling ourselves all along thinking this was a product that could be of great benefit to borrowers.

But what if we look at it another way? What if the boom has already happened? Indeed, what if we’re currently in the middle of it?

Cast your mind back for me to early 2016. Back then we were hearing predictions from lenders that second charge acceptances would fall by 20% to 30% as a result of MCD. Stricter stress testing and robust affordability assessments, said much of the lender community, meant a drop of at least 20% was likely.

Commentators spoke of business that was being written regularly pre-MCD that would never get through post. There was talk of some smaller lenders having to bow out of the market and ‘less credit worthy’ customers being turned away.

Yes, these predictions may have been overshadowed by talk of brokers jumping at the chance to offer seconds and first and second charge mortgage coming together in one big happy family but make no mistake those forecasts were made.

Why then are we looking at current figures – which show second charge lending has grown by 1% in that time – negatively? Surely, given the starting point we are working from, those figures show the industry has actually done really well. If the starting point was 75 or 80% of where the market had been, then 101% is actually good growth – especially as BTL lending also started to tighten towards the end of the year.

Indeed, if we take a positive approach to all of this, we could say the areas that were in our control – the products, the rates, the packaging and referral services on offer – we’ve excelled at. Jointly specialist second charge brokers and lenders have done a marvellous job.

Rates are now almost in line with first charges. Products are flexible and transparent. Players within the second charge sector have embraced MCD and done our utmost to ensure we mitigate the falls in lending brought about by the onset of regulation and promoted the benefits of seconds to the best of our ability.

It is the areas which are ultimately out of our control – i.e. mortgage brokers engagement with the sector – that have perhaps not developed in the way we had hoped.

And it’s in these areas where the opportunity lies. This is still essentially untapped territory and brokers, lenders, networks, clubs and the trade press need to work together to get the message out. Once brokers get it the potential for market growth is huge.

We’re already seeing sentiment towards seconds change somewhat. We’re hearing comments from brokers that show they’re starting to understand the need for seconds.

They’re telling us they recognise that if they don’t offer seconds someone else might, which means they lose the income on the loan and potentially lose the client.

They’re starting to understand that seconds provide more options in terms of the purpose of the loan. Debt consolidation is causing brokers problems in the first charge market, it’s much less of a problem in the seconds arena.

They realise seconds are a great shorter term fix due to low or zero early repayment charges – even on fixed rate products. They’re realised the flexibility on offer, due to the ability to over pay or redeem early. Some brokers have even described second charge loans as a secured overdraft or like a secured credit card facility.

They’re seeing that cases they would consider as adverse, in many cases second charge lenders would consider as prime or near prime and offer rates which compete with, or are sometimes cheaper, first charge rates.

These comments are enough to make us realise that while the mortgage broker community may not have reacted with the gusto we were hoping for and perhaps the growth from this end of the market didn’t materialise as quickly as expected, there are signs that it will. The tides are turning slowly, but turning all the same.

So we’ll keep beating that drum, keep spreading the message and won’t assume that everyone who wants to be involved in seconds already is. Brokers are starting to realise that seconds enhance their business. More importantly they are appreciating that not offering seconds can harm their business.

A year on from MCD progress has been made and the industry has collectively turned a forecasted 20 to 30% drop into growth. Enquiry levels are on the increase so maybe it’s during 2017 that we see the next step change.

www.promisemoney.co.uk

01902 585052


    Find a secured loan

    Enter some details and we will be in touch – this will NOT affect your credit rating.

    How much you would like to borrow?

    £

    Type in the box for larger amounts

    For how long?

    yrs

    Use the slider or type into the box

    Are you resident in the UK?

    Do you own property in the UK?

    About you...

    Your name:

    Your forename:

    Your surname:

    Your email address:

    Your phone number:

    Notes...


    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.
    Secured / Second Charge Loans secured on land
    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 £117,730.2
    By submitting any information to us, you are confirming you have read and understood the Data Protection & Privacy Policy.

    Latest Articles


    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

    Website www.promisemoney.co.uk