The European Mortgage Credit Directive has opened up new opportunities for mortgage brokers to help their customers. The Second Charge market is now aligned with the First charge market under MCOB. This change has given customers more choice on how they raise funds secured on their homes.
The new regulation gives mortgage brokers a choice, either to provide advice to customers as part of their scope of service, or choose to introduce their customers to a third party where they identify where a Second charge loan may be suitable.
Legal & General Mortgage Club want to help members by offering choice and support whichever route brokers decide to take.
There are a number of reasons why a customer may need to take out a second charge loan rather than a remortgage or a further advance. A second charge loan can be used for almost any legal purpose so it is important that customers are given the choice.
We have a panel of Second Charge Lenders for you to go direct. Their products are on sourcing systems so it is easy for you to compare.
The Club has also built relationships with three of the market’s top Second Charge loan companies. This means you can offer your customers some of the best rates in the market and at the same time receive an income for every introduction that ends in completion.
- There's more choice in the market
There are more lenders coming into the market, meaning more products available and a wider range of rates giving clients more options and more choice. This also drives competition, which leads to lower rates.
- Fees are coming down
Now that this market sector falls under the FCA's Mortgage Conduct of Business rules (MCOB), lenders and Master Brokers are reviewing the fees charged to clients, and many have been reduced. In some cases now, an Intermediary can choose not to charge their client a fee.
- Second charge loans can leave the main mortgage undisturbed
Many homeowners will be enjoying very low rates on their mortgage at the moment, especially if they have a lifetime tracker mortgage. This could change if they opted for a remortgage with new rates and potential early repayment or arrangement fees coming into the mix. A second charge loan eliminates this risk and is a great alternative.
- The second charge loans market is for everyone
There was a time when second charge loans were seen as the last hope for those with few to little options. Not anymore. With many people having so much equity in their properties, it's only natural to want to borrow against it, maybe for a holiday home, a buy-to-let property or a business venture. A second charge loan is an extremely viable option.
- A second charge loan can be good for clients whose circumstances have recently changed
Getting a remortgage requires a lot of information and if a customer’s circumstances have recently changed, they may find that they do not meet eligibility criteria. A second charge loan could be the answer as they have wide ranging criteria and would leave the current mortgage in place.
- Clients can borrow more at a lower rate
The marginal rate of a mortgage can be very high at higher LTV ratios. A second charge loan means that only this element of the loan is at a higher rate. This is not only cost effective but, if the new second charge loan is the first loan to be repaid, the underlying mortgage – with its lower rate – remains intact.
- The second charge loans market is forecast to grow
Partly due to the impact of the MCD, and partly due to the extra competition, the second charge mortgage market is growing, and is forecast to grow further.
If you have a question please call our Mortgage Support Services team on 01226 230 504. Monday to Friday 9am to 5.30pm. We may record and monitor calls. Call charges will vary.