The Intermediary – May 2025 - Flipbook - Page 24
S E C O N D C H A RG E
In focus
Waking the
sleeping giant
T
he second charge
mortgage industry is a
sleeping giant. A large
number of mortgage
advisers are missing
a trick by ignoring
its considerable merits. In doing so,
they are not only doing themselves
a disservice, but more importantly,
their clients.
I’ve been directly involved in
second charge mortgages for over 25
years. I’ve seen good and bad times,
brokers and lenders come and go, and
a number of challenges brought and
overcome. As such, I feel well placed
to use that experience to draw some
conclusions on where the industry
finds itself today.
Data published by the Finance &
Leasing Association (FLA) shows
that the industry continues to grow.
Comparing March 2024 to March
2025 shows an increase in wrien
agreements from 2,894 to 3,428, an
18% increase. A decent percentage,
but when I look back 20 years, I was
working for Loans.co.uk when we
regularly wrote 2,000 second charge
mortgages a month. That was just our
company. I suspect the industry wrote
five-times the business it writes today.
So why is this? Well, 20 years
ago, second charge brokers got
their business directly from their
own advertising; direct mail, TV,
and the internet were the main
channels. Today, while some business
is generated online, a lot more is
generated through referrals from
mortgage brokers who specialise in
first charge mortgages.
Unfortunately, far too many
choose to ignore or dismiss second
charge products. This is despite them
claiming to cover the whole of the
market, of which the second charge
mortgage is actually a crucial part.
Helping hand
There are many reasons why I suspect
mortgage brokers discount second
22
The Intermediary | May 2025
charge mortgages. These include
ignorance, a misconception of
associated fees and charges, of rates,
and of process. Some don’t take the
time to understand the benefits to
their clients. Some don’t understand
the focus on Consumer Duty and
compliance that lives within our
business, that we are as qualified as
they are, and that our passion for
ensuring correct customer outcomes
runs as deep as theirs.
Yet second charge mortgages can
provide great solution to a customer’s
capital raising needs.
Just like two high street lenders
might have different ways of
compliantly assessing affordability,
the second charge industry focuses
more on actual affordability and
less on an arbitrary loan-to-income
(LTI) calculation. This can mean that
a customer may pass affordability
calculations on a second charge, where
they may not on a first charge.
Some second charge lenders may be
more comfortable with a near prime
application, or one with multiple
and complex income, or where debt
consolidation is the primary purpose
of borrowing.
Customers need help. As their
mortgage adviser, if you are not able
to provide it, their need doesn’t go
away. So, your customer may go online
and find a second charge mortgage
broker through an aggregator website
or suchlike, and just like that, you’ve
lost them. They’ve gone to someone
who has taken time to understand the
market and provide a solution. You’ve
lost income from this transaction, and
potentially future ones as well if they
don’t come back to you.
Building up
The recent entry of two major lenders
into the second charge mortgage
market is a clear indication of the
sector’s growing significance within
the broader mortgage landscape.
Their arrival not only demonstrates
JOE DEFRIES
is managing director
at The Loan Partnership
increasing confidence in the stability
and profitability of second charge
lending, but also signals that this onceniche area is becoming a mainstream
financial solution for borrowers.
As more homeowners look for
flexible ways to access equity without
remortgaging, the presence of these
heavyweight lenders confirms that
the second charge market is not only
expanding, but firmly establishing
itself as a permanent fixture in the
mortgage world.
Given the Financial Conduct
Authority’s (FCA) regulation of
second charge mortgages, and the
second charge mortgage industry’s
positive embracing of that regulation,
it is important to take the time to
educate yourself around how, in the
right circumstances, a second charge
mortgage could be a great solution for
your customer.
At The Loan Partnership, we are
proud of the education we have
delivered to hundreds of mortgage
advisers through our partnerships
with clubs and networks, and our
outreach to the directly authorised
(DA) market. If you’d like to learn
more, or have a customer who you
think might benefit, why not give me
a call? I’d be delighted to be able to tell
you if a second charge mortgage could
be an option for your client.
In time, I live in hope that if first
charge mortgage brokers who call
themselves ‘whole of market’ do not
consider a second charge alongside
the first charge option – and select
the right one for their customer – the
regulator will intervene to make sure
customers do indeed get the right
outcome each and every time. Only
then will we truly see the awakening
of the sleeping giant. ●
