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

Is a sleeping giant waking?

By Jon Sturgess, Head of Sales at Masthaven |

 After a sleepy 2016, the second charge mortgage market is stirring.

New data from the Finance & Leasing Association (FLA) indicates three months of consecutive growth in early 2017 in second charge lending, which marks a reverse to declining figures in 2016. 

This new data shines a light through gloomier consumer spending figures, which show households feeling squeezed and shoppers sticking to “essentials” as their spending on recreation and culture drops. Separate spending data reiterates that consumers are coping with a “new normal of rising prices and subdued wage growth”.

This data paints a picture of households’ changing priorities – indicating homeowners are spending carefully with a focus on home life that includes borrowing for property renovations and extensions. Masthaven is also seeing this trend reflected in its business patterns – more advisers are coming to us to discuss second charge mortgages.

So, while some media commentators continue to urge homeowners to explore alternative solutions, FLA data does show that second charge mortgages are a viable solution for certain people.

I’ve read recent media debates with interest, and I can’t avoid noticing how the role of specialist lenders is being recognised more frequently by mainstream media; it’s excellent to hear them engaging with specialist lenders to get a view of how they work with clients who may suit second charge loans. 

In a more competitive landscape – bolstered by the arrival of challenger banks – the second charge loan market is having a second wind. This renewed energy has delivered lower interest rates and introducers seem to feel more comfortable offering second charge loans today. 

Moreover, lenders are working with brokers and networks to offer new products, and I hear directly authorised (DA) intermediaries talking about expanding their proposition so they can provide a more balanced offering and give customers a greater choice of solutions. 

As second charge moves closer to centre stage, I believe master brokers have a key role to play. When I meet them, I see how they’re investing time, effort and money to help educate the first charge market about the benefits of second charge loans. Masthaven is definitely seeing a greater level of diversity from master brokers as they offer many different charging structures: from upfront to valuations being paid or paid at completion.

I believe these business developments and market adjustments are symptomatic of a much wider, long-term shift: our changing society. 

Today’s customers want a healthy choice of solutions to fit their lifestyle, and help navigating the options. The role of specialist lenders and intermediaries – who can access decent product ranges and help clients weigh up what suits their circumstances – has never been more important as householders face continued pressure to stretch their income and adapt to accommodate new family structures. I believe second charge loans have a new place in this evolving world. 

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