New era for second charge loans

Customers who have unconventional modes of income or employment, or those who are locked into fixed-rate mortgages with prohibitive Early-Repayment Charges who wish to borrow at a higher loan-to-value ratio or protect an existing mortgage rate. These are just a few of the scenarios in which re-mortgaging options can often be unsuitable.

Prior to the introduction of the Mortgage Credit Directive (MCD) in December 2016, low levels of product knowledge and concerns about fees were being cited as some of the primary reasons for the low volumes of business.

However, the introduction of the MCD brought the second charge mortgage sector further into line with its first charge cousin (Main Mortgage).

There have also been moves towards new and previously untapped areas of influence within the market, with growing numbers of buy-to-let landlords using second-charge loans to grow their portfolios or to fund improvements on existing properties, combined with a comparable rise in the number of customers using loans to consolidate debt.

Indeed, many people within the industry now believe that the uncertainties of a volatile Brexit and the rise in the number of adverse-credit lending scenarios are driving enquiries upwards.

There has also been a significant uptick in cases involving home improvements where customers have been referred for a second charge mortgage as a cheaper option than re-mortgaging.

As we venture ever further into 2019, we can see an industry that is characterised by greater revenue and business streams, wider opportunities, and regulatory safeguards and increased levels of acceptance among both consumers and advisers. In short, the future for second charge loans looks very bright.

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