If intermediaries decide not to include second charge loans within their scope of business come next march, scores of brokers could miss out on potential business.
It seems a little odd that while bank of England base rates could be on hold for the foreseeable future, with some thanks to china, intermediaries could purposefully be missing out on business.
With the second charge market currently on course to lend over £750m this year and a staggering 10% of homeowners who are either on lifetime trackers or low fixed rate mortgages but are still in need of further cash , brokers have the potential to increase their client base by offering alternative cheaper options.
From a Legislative stand point, come 21st March 2016 otherwise known as Mortgage Credit Directive day, second charge loans will be moved in line with first charge mortgages. This will result in intermediaries being required to inform consumers that both choices are available to them. If the intermediary does not have seconds within their scope of service then they cannot advise on it. However, the critical point is that they will still need to declare the option.
The FCA (Financial Conduct Authority) has stated “if an existing mortgage holder wishes to borrow more, the rules require firms to make the customer aware that other forms of borrowing are available that may also meet the need”.
So what does this mean for an intermediary who is not including it? Possibly a drop in business?
If a broker does not have a suitable product within its range, it cannot recommend the ‘least bad ‘product. This may become an issue if a remortgage is more expensive for a borrower than a second charge loan, even if seconds are not included in its scope.
So why would a broker leave seconds out of its scope?
The main consensus is the amount of work and resource that will go into it- that and the underlying misconceptions that the market is not that profitable or lacks competitive products.
Although seconds are being bought in line with the first mortgage industry it will still be somewhat of a niche industry when it comes to packaging a deal, First mortgage brokers can and will form relationships and coalitions if you like with secured loan master brokers to work together to harness the best possible deal for their clients and to share the profits.
We at Hoskin Home loans are more than happy to take charge of any secured loan cases and take charge of giving the advice to your clients.
If you are interested in forming a relationship with us or merely want to discuss the working process with us then do not hesitate to call and arrange for someone to come and visit you.
Until the next time Ian Chambers @HoskinHomeLoans
Hoskin Financial Planning Ltd is authorised and regulated by the Financial Conduct Authority number 613005. The guidance and/or advice contained in this website is subject to UK regulatory regime and is therefore restricted to consumers based in the UK. Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on a mortgage or any other debt secured on it.
