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Do you expect to see less or more second charge mortgage lenders in 2018?

Post MCD: The party’s only starting

By Paul Woodworth, Managing Director of Gateway2Finance |

 In the past few months, we have all been busy preparing for the implementation of the Mortgage Credit Directive (MCD).

 In the past few months, we have all been busy preparing for the implementation of the Mortgage Credit Directive (MCD). Second charge mortgage brokers have been through the Financial Conduct Authority’s (FCA) authorisation process, enhancing procedures and systems as well as undertaking major training programmes to ensure their staff are up to speed with the different regulatory requirements and are, of course, competent.

The party’s only starting!

There has been so much said about the movement of second charge loans into the mortgage regime at the FCA and what influence it will have on the industry. I was at a dinner in January when a senior mortgage executive with a major mortgage company smugly advised me that come the MCD, “the party would be over for secured loans”, as lenders and brokers struggle to come to terms with the demands of both the MCD and the FCA. I remember saying that the industry certainly hasn’t had much to celebrate in recent times, however, with the regulatory changes, the ‘party’s only starting’, and by that, I mean ‘hard work’.

That is exactly how I feel today. I think it’s fair to say that the industry has improved significantly as a proposition compared with that of recent years. The regulatory changes, more flexible and competitive product ranges and the fact that customers taking out a loan have had the benefit of being advised by a qualified individual can all be considered as major steps forward for the industry.

All these changes and the biggest is yet to come…

In recent weeks I have been out and about conducting presentations and speaking with mortgage advisers about the changes and the opportunities that have opened up as a result. As always, there are a number of mortgage advisers who understand the product, the recent changes and have a healthy respect for the benefits that the product can bring. That’s the good news. The bad news is that, despite all of the media coverage, there are still some advisers that don’t want to consider a secured loan option under any circumstances, and this includes debt consolidation and capital raising when, it can be argued, that for some customers a second charge loan provides the best outcome.

I along with other business owners and relationship managers still keep coming up against the same old misconceptions about broker fees, high interest rates, only adverse products etc. All of these misconceptions can be handled and argued in a very clear and factual way with hard evidence to support our arguments. Some of the objections I have struggled with include: ‘I’ve never dealt with secured loans and never will’, or, ‘I’ve never liked secured loans’, and, ‘I never get anyone asking for a secured loan’… and there are many more…


As these comments come from qualified mortgage advisers who market themselves as being mortgage specialists providing a professional service, how can they justify omitting such a valuable product from their portfolio?

We in the industry have been selling the benefits of these products for a number of years, but some people just don’t want to listen.

During one particular meeting, I came up against two ‘new’ objections.

‘Advising on secured loans might take income away from remortgaging’

Surely, the issue must be achieving the best outcome for the customer – and secured loans, in some cases, are perfect for those on existing mortgage deals. There is also, of course, the opportunity to remortgage at a later date when the existing mortgage becomes less competitive, such as when a particular product expires. The chances are, in many cases, that the adviser earns more from the secured loan than the remortgage anyway. So if the customer has a good outcome and the adviser earns more – what’s the problem?

‘With all of these ambulance chasers, a client may come back and make a claim’

Yes, they might. However, they are much more likely to make a claim in circumstances whereby a mortgage adviser has recommended a remortgage incurring redemption charges, conveyancing fees and first mortgage application fees when in fact there was a more cost-effective, flexible and quicker option available – but not considered because the adviser simply didn’t like the product.

So on with the hard work

There are many mortgage advisers who are already considering first and second charge lending when capital raising, and understand the benefits of both products. Mortgage advisers can simply refer customers to a second charge broker to provide advice on these products or be supported through the advisory process should they wish to provide advice themselves.

In either scenario, the education process must continue, and mortgage advisers should be encouraged to seek assistance from second charge brokers to ensure that the best customer outcome is not overlooked.

Attributed to Paul Woodworth, Managing Director of Gateway2Finance 

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