I make no apology for revisiting this particular topic, because I believe it helps us all understand some of the factors behind the growing success of the secured loans market in 2013.
I actually see some positives in the credit crunch that decimated large parts of the industry. No, I’m not a masochist, but the fact remains that one of the pluses was the eradication of substandard lending and those players who are totally reliant on sub prime lending. I’m not talking about the genuine cases requiring non conforming solutions, but rather those practitioners, who at every opportunity were quite happy to saddle a client with inappropriate and expensive products, which proved unsustainable both for the client and the lender – particularly when the arrears set in.
The intervening period after 2008 also allowed the industry to finish a root and branch change to simplify terms and conditions and most particularly the charging structure, which had proved to be a barrier to the wider broker community.
There is now no comparison to the offering available to brokers and their clients in 2013. We have complete transparency; only an alien or someone unfamiliar with English as a first language could ever claim that today’s T&Cs were in any way difficult to understand or open to the wrong interpretation. In many ways, secured loans and how they work are easier to understand than first charge mortgages, particularly where charges are concerned!
Talking about first charge mortgages, I really think we, in the secured loans sector, really do owe mortgage lenders a huge debt of gratitude. Their interpretation of the regulator’s stance on interest only resulted in an almost lemming like stampede to limit or remove the interest only option for new borrowers, particularly those requiring remortgages or further advances. The unintended consequence has been that brokers have had to look hard, some for the first time, for alternative solutions to capital raising. After all the efforts we have all been putting into persuading the broker community to consider secured loans, our friends in the first charge market have unwittingly provided the best inducement to brokers to take the blinkers off and make a radical reassessment.
There are still some external factors we cannot control, which might still have a bearing on the further rise of the sector. That is why it is important that we all embrace the upcoming change of regulator and stay abreast of the changes. However, the only ones likely to be resistant are the bottom feeders and they won’t be missed.
Bradley Moore is head of secured loans at Brightstar Financial