The Intermediary – April 2025 - Flipbook - Page 58
S E C O N D C H A RG E
Opinion
Increasing figures
demonstrate second
charge popularity
I
n February, the Finance &
Leasing Association (FLA)
announced that new business
volumes were up by 17% in
2024, reaching almost 36,000
new agreements. There were
two particular points to take from
this news. First, this was the highest
annual total since 2009, and second,
every month of 2024 showed an
increase in business volumes.
Given that the FLA figures rely
on feedback from members, it does
not account for other producers. So,
the actual figures are probably a lot
higher. What is significant is the yearon-year improvement in the volumes
of business.
I have said before that judging the
second charge market against its
first charge sibling purely on volume
does not give an accurate like-for-like
comparison – and let’s face it, why
should it? The mainstream mortgage
market has an average loan size of
approximately £190,000, while the
average second charge loan size is
approximately £45,000. Enough said.
Growing acceptance
The increase in second charge
mortgages comes down to a number
of factors. Primarily, there has been a
significant shi in intermediary focus
from a predominantly remortgage
answer to capital raising, and in turn,
a wider acceptance that second charge
has role to play.
Greater advocacy of the second
charge market by providers, both
lenders and packagers has seen greater
interest from the broker community
along with a genuine desire to try
and understand something new, in
many cases.
As the sector came under the
regulatory purview of the Financial
Conduct Authority (FCA), rather than
58
The Intermediary | April 2025
LAURA THOMAS
is regional sales manager
at Equifinance
Greater advocacy of
the second charge market
by providers, both lenders
and packagers, has seen
greater interest from the
broker community”
the Consumer Credit Act, there were
the first stirrings of greater interest in
second charge.
The FCA’s insistence that brokers
must inform capital raising clients
of all product options, including
second charge, was a not insignificant
moment in shiing the narrative of
more general acceptance.
While the FCA’s position did not ask
advisers to show direct comparisons
between remortgaging and a second
charge option, just the simple request
that clients are informed of all their
options was another important step
along the road to greater acceptance
that has helped legitimise the sector.
However, the introduction of
Consumer Duty has also been a major
factor in the re-evaluation of second
charge, and has given the sector a
welcome boost that is reflected in
its growth.
Consumer Duty is clear on the
overriding need to seek the best
outcomes for clients, and that means
advisers have needed to become beer
informed, especially in the way they
interact with clients who might
need more consideration than just
seeking to arrange another mortgage,
regardless of the situation.
Advisers are now, more than
ever, in the business of giving
unbiased advice first and foremost.
If a remortgage or loan is the right
outcome for a particular client,
then so be it.
Due to Consumer Duty’s insistence
on the primacy of customer
outcomes there is now an implicit
understanding that there will be
retrospective action taken by the
regulator when and if it is discovered
that the advice given has not been
sufficiently researched.
Increasing technology
Personally, I revel in the technology
revolution and what it has done
for the lending industry. But as an
enthusiastic advocate, I still have to
make sure that our enthusiasm for
technology does not blind us to its
limitations.
We all welcome the ability that
comes with technology to streamline
processes, and to a large extent it
would be fair to say that today’s
mortgage market could not operate
without the assistance of the electronic
wizardry that modern technology
brings to the customer journey.
However, it would be foolish to lose
sight of the continued importance
of individual case assessment by
experienced underwriters.
Any lender, especially in the
specialist lending sector, which
believes that an algorithm is the only
answer to assessing cases, is going to
lose market share and the confidence
of its introducers. ●
