The second charge market has recently been making headlines, with estimates revealing how the sector has reached a five year high and is set to top £1 billion by the end of the year. This begs the question; what or who is responsible for this success?
A new era
In recent years, the processes for first and second charges have been very different and this has proved to be confusing. This left some intermediaries feeling that they did not fully understand the market enough to confidently discuss second charges with clients and this led to them being ignored.
However, one of the factors behind the escalating growth of the sector has been driven by the looming implementation date of the Mortgage Credit Directive (MCD). In light of recent lending figures, it is also clear that the regulation of the market has resulted in more intermediaries considering second charge mortgages in even more scenarios.
The MCD will help to align second charges to the mainstream market and will also mean the same rules will apply to first and second charge loans. As a result, the artificial division between the two will begin to disintegrate, resulting in new opportunities which makes sense and is, in my opinion, long overdue.
Although the Directive has been a contributing factor, I believe the new commitment by lenders to engage with and educate intermediaries has been absolutely instrumental to the second charge lending market. As a result of this new found understanding, more and more intermediaries now have a much deeper and clearer understanding of second charge loan products and their benefits and are recognising that there are other suitable options available for their clients. It is therefore little surprise that second charge lending is set to top £1 billion this year with £93 million worth of monthly secured lending in September.
It is a time of change for the second charge lending industry, and with change comes opportunity; opportunity to encourage product innovation, provide better transparency and importantly, to continue engaging and educating the intermediary community.
That job is not just for our lender partners but it is also ours, and Brightstar has already run numerous events countrywide and will continue to do so into 2016. The second charge market has reached an exciting milestone and perceptions of the sector are much improved. Regulation can only assist in this, because the more intermediaries understand about second charges, their benefits and where they can assist their clients, the more likely they are to use them.
All of these factors are driving positive growth in the sector and there is a strong momentum to continue this upward trend and I am confident that the industry will continue to thrive and see strong results.
Bradley Moore is director of second charge loans at Brightstar Financial