You might be able to go back, but I would be surprised if you remember exactly what you were doing on March 21, 2016.
This date, however, was momentous for the entire mortgage market – and in particular for advisers, as it saw the introduction of the Mortgage Credit Directive (MCD) into UK financial services regulation, which has essentially leveled the playing field between first and second mortgages.
It may seem strange that I am referring to a directive that has been part of our environment for over five years and that you might assume that it has been fully incorporated into “business as normal” by advisers. But the latter is not necessarily the case.
As a community, we have had much time to practice
For example, among a number of other changes, the MCD initiated the new advisor’s regulatory responsibility that every potential remortgage or additional advance client should be informed that a second mortgage might be a viable alternative. A fairly straightforward process, you can assume, and which, if you think about it, should mean that a significant number of borrowers have been counseled and referred in seconds as an alternative to what might be considered the more product recommendation route. “Traditional”.
However, more than five years later – and as a master broker specializing in the seconds market – we can say with certainty that a minority of advisers still do not. You can assume that each advisor will have placed at least one second mortgage client during this time. But we deal with a small number of advisers who, when you ask how many second loads they’ve done, always say, “Never did. “
Of course, they may be able to provide the regulator with evidence to support a refinance or an advanced recommendation. But can they really say that no customer during that time deserved a second charge?
If so, this may lead us, and the regulator, to the question of whether the cohort of clients of this adviser is missing on access to what may be a more appropriate product, an alternative that better meets their needs and requirements. . Not to mention the additional revenue that might be available to their business if the advisor was actively charging the second option in front of clients.
The first step is to make customers aware that their options extend to seconds
Right now, homeowners would be hard-pressed to be unaware of the ultra-competitive first mortgage market. They might be considering very low rates in the market and, together with their need to access equity in their home, might think this was a ripe market for the pick.
However, as an advisor, you will be well aware that the “general interest rates” offered are out of reach for a significant number of homeowners, for several reasons: income / affordability does not match, they are out of reach. loan-to-value, they have a number of years left on their current contract with significant fees attached … the list goes on.
The MCD has basically leveled the playing field between the first and second mortgages
And yet, this loan requirement remains. And this is exactly the kind of situation that the CDM was brought in to deal with. For the customers listed above, are they offered the second charging alternative? Or are advisers just trying to get a new mortgage or get an early deal that might end up costing more?
Let’s not forget that the second charges can be used to finance any legal purpose – tax bills, tuition, debt consolidation, home renovations, to provide a deposit for a property for rent, etc. The only exception is to pay off gambling debts.
Pink Pig recently handled a claim for a client to raise £ 250,000 for a combination of home improvement (£ 195,000) and debt consolidation (£ 55,000). Their existing mortgage was with Barclays, which did not give the additional advance due to multiple income issues; Additionally, a remortgage would have come with a prepayment charge (ERC) of £ 36,000 as the customer had a fixed rate until 2024.
We deal with a small number of advisers who, when you ask how many second loads they’ve done, always tell you, “never done one”
We were able to proceed on six times the common income – standard in the second load industry – to get the product they needed. They were able to use the money as needed while still maintaining their first charge rate and avoiding ERC.
Undoubtedly, many more customers these circumstances and requirements. But the first step is to raise awareness to the customers their options extend seconds and in the end, it could be the fastest and most cost effective mortgage available to get money that they need.
As a community, we’ve had a lot of time to put this into practice, and for those who aren’t, the time for a change is now.
James Rainbird is Managing Director of Pink Pig Loans