The second charge mortgage market has undergone huge changes over the last 12 months following the regulation of the sector by the FCA. This has made second charge mortgages move centre stage, and acquire a greater veneer of respectability, but it comes with additional responsibilities.
Some of the original rules attached to them under regulation by the Consumer Credit Act have still carried over, but the FCA has added to the rules governing their sale.
The positive knock-on effect has been seen in the sales of second charge mortgages and industry observers expect the market to take off even more now.
As you can imagine, since the introduction of the Mortgage Credit Directive there has been a huge number of changes in the second charge lending market.
These changes have been extremely positive. The major one from our perspective is that consumers now benefit from a much more professional approach when applying for a second charge mortgage. The process they go through is now is as rigorous as when they are applying for a mainstream mortgage or a re-mortgage. From a customer journey perspective, this is a fundamentally positive change. This attention to detail on front-end processes means that the back-end is far quicker.
The other significant change is that lenders are far more competitive than they were. This is reflected in the products now available, for example interest rates are starting at 5% or less.
Common reasons for using a second charge loan include preserving their existing first charge mortgage if they have a good deal or would incur charges to change, or if they have unusual circumstances like becoming self-employed.
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