The Intermediary – May 2025 - Flipbook - Page 17
S E C O N D C H A RG E
In focus
Are we getting
fixated on speed?
J
ust how important is speed
in terms of the quality of
service we offer? A first
reaction might be that it is
of paramount importance,
and overshadows other
considerations. However, I would
argue that speed is interpreted in
different ways by all of us – whether as
customer, adviser, or lender – and that
we need to take this into account in the
advice process.
As lenders and advisers, we tend
to think that it is all about the time
taken to complete the mortgage
process, but that represents only one
interpretation – although a large one,
admiedly.
Another factor to remember is that
the longer the production line, the
greater the chance of delays. While
first charge lenders in particular are
under pressure currently because
of the property purchase miniboom, local authority, valuation and
conveyancing backlogs are also
adding to the problem. It is easy
to see how the house purchase
market can stall, but where does
that leave homeowners who want to
raise capital?
who follow the guidelines of
informing customers that a second
charge mortgage can provide an
alternative to a remortgage.
I am not going to list the many
examples of where a second charge
mortgage is a more appropriate choice
for capital raisers, but instead just
concentrate on meeting a customer’s
need for a fast resolution.
The main issue that needs assessing
is exactly how pressed the customer is
to receive the capital required.
In other words, is the deadline
realistic for them and for the lender?
Next, whatever the funding solution
being considered, does it come with
conditions which increase cost
unnecessarily?
It is reasonable
to suggest that
advisers relying on fast
remortgages are likely to
be disappointed”
Swift resolutions
With the welcome news of increasing
volumes of second charge mortgages
last month – as the market recorded
the highest annual total since 2009
– and that every month of 2024
had shown an increase in business
volumes the highest monthly level
of new business since the start of the
lockdown, it is worth considering
how much influence the need for
fast resolutions has had on those
numbers?
With first charge mortgage
providers struggling to cope, it is
reasonable to suggest that advisers
relying on fast remortgages are
likely to be disappointed at present.
Therefore, what I want to do is
connect with open-minded advisers
LAURA THOMAS
is regional sales manager
at Equifinance
Hidden costs
A good example here would be the
choice of a remortgage which involves
an early repayment charge (ERC) to
be paid. Are the customers prepared
to pay that price just to get the money
they require, or could they wait for
the ERC period to end and put off the
transaction until then? If the laer,
and the answer is no, then if they do
not want to pay the ERC along with
the costs of remortgaging, a second
charge mortgage should be a serious
consideration.
It is worth mentioning that under
Consumer Duty, the regulator is
more likely to question decisions
where there is ambiguity over the
recommendation of a remortgage,
and advisers need to be sure that
they have clear evidence that clients
are beer off having a remortgage
recommended over a second charge.
Speed must be interpreted on
different levels. How quickly must
the customer have the money? Can
the lender meet that deadline? Then,
must the customer pay a financial
penalty for taking a particular course
of action?
In the cases referenced above there
were beer choices, especially if the
capital was needed immediately.
However, if the customers had been in
a position to wait for the ERC to end,
then the need for speed was not really
the issue it seemed to be, and both a
remortgage and a second charge loan
are valid alternatives.
Perhaps cases like this serve as a
reminder that there is no such thing
as a ‘one case fits all’ lending scenario
when offering advice. So, the need for
speed must be properly understood
and applied to the path recommended
to the customer. ●
May 2025 | The Intermediary
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