Second charges expanding

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Much has been said about the expanding trend of the second charge sector over the past year. Brokers and clients alike continue to be surprised at how competitive rates are and how, in certain circumstances, it can make much better financial sense to arrange a second charge mortgage than to re-mortgage a property.

Since the implementation of the Mortgage Credit Directive, there has been a significant increase in lenders entering the sector. These fresh players not only serve to reduce annual interest rates through the increased competition they bring but also add value to the second charge proposition through innovation in their products.

The attempt to align first and second charge mortgages continue and will always be aided by similarity on fees and rates.

For lenders, a second charge, of course, poses a greater risk than a first charge, so there will always be differences between the rates on offer. That said, with the cheapest published rate starting at just a little over 4% and some lenders offering the potential to secure even cheaper rates based on risk, second charges provide a valid alternative for clients looking to raise additional funds against their property.

Range of deals on offer

 

The Brexit referendum result, coupled with the more potential rises to the Bank of England base rate, means more clients are looking for the security of a fixed rate over a longer term but with the added flexibility to overpay without penalty.

Not so long ago there was not even a fixed-rate option available, with every second charge product at the lender’s standard variable rate. The fact that discounted and fixed rates have been added to product ranges is a testament to the progress of the sector in a relatively short period.

Help?

If you are looking to raise funds against your property please make contact and one of our advisers will be happy to assist.

Get professional help, it pays

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A new campaign is being launched very soon to tackle mortgage and second charge loan myths and highlight the importance of professional advice when it comes to taking out a secured loan.

More stringent lending rules are making it tougher to get a mortgage, and yet new research shows that more than half – 58% – of consumers, including many landlords, may end up with the wrong loan, because they are unaware that a mortgage broker can offer a greater product choice than a bank or building society.

This new study found that 22% of respondents thought that brokers and banks have access to the same products, when in fact using a broker can give you access to nearly 15 times as many products.

When asked whether they agreed with a series of statements about mortgage advice, one in six thought their bank or building society would be able to give them access to the same impartial advice as a mortgage broker.

The Mortgage Myths campaign aims to put the spotlight on misunderstandings like these, highlight the valuable role of independent advice from a mortgage broker and encourage consumers to speak to an adviser about their lending options.

As an industry, there clearly is a significant amount of work to be done to change these attitudes, educate consumers and promote the advantages of using a mortgage broker.

Although some consumers appear to believe they have secured the best deal possible by going directly to their lender, without speaking to a broker they could be missing out on thousands of lending products that might be even better suited to their needs.

Like to know more?

Please do make contact and one of our fully qualified independent advisers will be happy to help.

Second Charge Loan, the better alternative

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The second charge loan market has recently been hitting the headlines revealing 3-year high lending figures breaking all recent records.

In years gone by the processes for first and second charge mortgages had been very different, and this proved confusing to most people. Borrowers clearly did not fully understand how a second charge loan worked or how to go about finding out what it could do for them.

One of the factors behind the escalating growth of this sector is driven by the extortionate interest rates being charged by unsecured lenders, in particular, the “payday lenders”. In light of the recent lending figures, it is clear recent regulation of the market has resulted in intermediaries or brokers considering second charge mortgages more closely. Regulation has helped align second charges to the mainstream mortgage market and opens up more choices for the borrower. As a result, the division between first and second charge lending has begun to be almost non-existent and this can only benefit all involved.

Resurgence of second charges

It is believed within the industry that the commitment from the lenders to engage with the intermediaries will be instrumental in the long-term success. As a result of this new found understanding more and more intermediaries have a deeper understanding of second charge lending and the potential benefits it offers clients. It is therefore little surprise that second charge lending is beginning to break all records.

Way forward

Second charge loans do not suit everybody and it is vitally important any potential client seeks the correct advice from a professionally qualified adviser. If you wish to know more please do not hesitate to contact us.