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



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By Paul Woodworth, managing director of Gateway2Finance |


 I would like to start my first blog of the year by wishing everyone in the mortgage and loans industry a very prosperous 2017.

 

 

Christmas for me was a quiet affair this year which suited me down to the ground. However, now it’s back to business and looking forward to what the next 12 months has in store.

I don’t think that many would argue that 2016 was a difficult year for the second charge mortgage industry. The year will be remembered mainly for the implementation of the Mortgage Credit Directive and the changes to the sales process that impacted on brokers and lenders alike. 

I’m still amazed that despite all the positives that the regulatory framework and sales process brings, I still hear comments from many first mortgage brokers relating to legacy issues dating back over 10 years. Many still hold misconceptions that interest rates, broker fees and redemption charges are too high and that a second charge mortgage is an option of last resort.

The industry didn’t help itself in 2016 when second charge mortgages moved from the consumer credit (Consumer Credit Sourcebook) to the mortgage (Mortgage Conduct of Business) regime within the FCA. I was of the opinion that the product would gain the credibility it deserves as all sales are now advised and the process was aligned to that of first mortgages. Instead we experienced a marketing ‘rush to the bottom’ with regards to fees. Many packagers entering the market began to offer what can only be unsustainable models, for example comparing a one-off application fee with a 10% broker fee, without explaining the additional costs to be incurred.

Those who market on the basis of fees alone should remember that the FCA does have rules regarding communications and that they should be clear, fair and not misleading. I also believe that marketing should not be based solely on price, as it’s also important to consider the size of panel and the scope of products available as well as the accuracy of the underwriting to ensure that the customer gets the most appropriate product available.

So, my two wishes for the industry in 2017 are:

•    Mortgage introducers begin to see that second charge mortgages are now a mainstream product and become more aware of the opportunities that exist by positively adding the product to their portfolio. 
•    More transparency with fees, so when a fee is charged, what is included and, just as importantly, what has been excluded from the fees quoted.  

On another note, the Loan Talk Second Charge Mortgage Awards 2016 take place this Thursday (12th January) in London. As in previous years, it takes place in mid-January and starts the year on a positive note, and this year will be no exception. I look forward to catching up with friends and colleagues from the industry.

Again, I would like to wish everyone all the very best for the new year.



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