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The Last Word Comment

Growing into a new regulatory world

The second-charge mortgage sector has witnessed considerable change in regulation and attitudes, but lenders can now look forward

Steve Harness

Commercial director, The Loans Engine

In a very true sense, lenders, within the mainstream mortgage market, have kicked off 2017 hungry for business. Competition, particularly for remortgage volume, is pretty fierce at present, especially in sectors that are deemed lower-risk – notably lower loan- to-value, prime, and residential. It makes the opportunities for those who fit this landscape significant, and advisers will undoubtedly be spending a considerable amount of their time looking at their existing database, targeting those who currently sit on standard variable rate (SVR) loans, and pointing out the savings that could be made if the borrower can match the affordability and criteria that lenders require in these post-MMR days.

Remortgaging possible?

And this makes the market particularly interesting at present, because, while it is clear that remortgaging off uncompetitive deals and rates offers savings, there will be a large group of borrowers for whom this is not the case. For instance, many borrowers are not on SVRs – far from it, they are actually on highly competitive lifetime trackers which makes a straight remortgage far less enticing, especially if they want to raise capital.

Then there are those for whom the lending landscape has effectively shifted under their feet since the advent of the MMR, and the tighter requirements.

Those who last remortgaged pre-MMR are likely to find a very different marketplace than they remember. However their need to raise finance is not going to go away, and, therefore, they will be wanting their advisers to consider other options in order to get to where they want to be.


Then there are those for whom the lending landscape has effectively shifted under their feet since the advent of the MMR, and the tighter requirements

Lending volumes for 2016 were comparable with 2015 and, given the regulatory change and the uncertainty generated by the EU Referendum vote, we must be happy overall with what has taken place since MCD. However, there is clear growth to be achieved and we believe the sector has to continue to make further strides if we are to see greater levels of engagement with the products.

Certainly, from our perspective, it became very clear early on last year that a new fee structure would be required if we were to appeal to first-charge advisers – who now have to consider other product options alongside a straight remortgage if their client wants to raise capital. This was because the old, traditional, all-encompassing fee model, which adds many thousands of pounds to a second-charge mortgage, was not going to sit well with them.

Having moved to an administration fee, it has been interesting to see which of our competitors have also made this move, and those which are continuing with the traditional model.


Overall, we believe that 2017 should be a pivotal year for seconds.

A new environment

It is into this new environment that we saw the move last year, as part of the Mortgage Credit Directive (MCD), of second-charge mortgages – now under the Financial Conduct Authority’s MCOB regime. It has (at the time of writing) almost been a full year since this move and, perhaps understandably, the sector has taken some time to get used to what this actually means.

The sector should now be comfortable with the regulatory changes and our focus has to be on developing the products, educating advisers and consumers, and outlining where a second-charge should be considered, especially in these days of growing remortgage activity.

It has been a relatively slow start in this new environment but our belief is that we will see growing activity as the year progresses. CCR

March 2017

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