There’s always a sense of anticipation at the start of any new year, especially when you’ve just come off the back of one of the most unpredictable 12 months in living memory. Having President Trump in the White House by the end of this month may well add to the frisson of uncertainty we all have; however, let’s not forget matters closer to home can also induce a mild sweat – Brexit negotiations anyone?
That said, these matters remain out of your sphere of influence and therefore it’s perhaps better to focus on what is within your remit, namely your business and servicing your clients. Take second-charges; a year ago we were all preparing for the introduction of the MCD and the inclusion of seconds within MCOB. Given everything else that happened in 2016, that transition already seems like a very minor footnote, however it did have some far-reaching consequences and will continue to do so for some time.
Now, we have firmly bedded into the new environment, demand for seconds is likely to be greater than ever, so advisers need to ensure they have a proposition in place to deal with this. Just recently, and this will give advisers an idea about the uses seconds can be put to, we’ve had clients taking out seconds in order to purchase holiday homes, or to carry out renovations, or to release equity from their home for other uses, at a time when they were unwilling to disturb their existing mortgage arrangements.
All are perfectly acceptable reasons for taking out a second-charge, and advisers should keep this in mind when working with clients who ordinarily would default to a traditional remortgage to raise capital. There is no question, the remortgage market is ultra-competitive right now, but I think we’re all aware that many borrowers may be trying to remortgage for the first time post-MMR, and therefore remortgaging may not be the administrative and underwriting ‘shoe-in’ it once was.
Let’s also not forget what is going on in the buy-to-let marketplace, where a spate of regulatory and taxation changes are making mortgages more difficult to obtain, maximum loan levels are dropping, and landlords are having to review the profitability of their portfolios. Given a tighter environment for buy-to-let remortgaging, we may well see an increase in demand and interest in second-charge options, and again advisers should have a plan in place for dealing with such clients.
This can all appear easier to say than do, especially when you’re looking to steer a client down an unfamiliar route. However, this is why businesses like ours exist, and the reduction in the level of fees charged by a number of distributors (including ourselves) should certainly make this a much easier conversation to have with clients. Remember, however, that this is also a fast-moving, competitive market and it may be worth your while simply introducing a potential second-charge client to a master broker, rather than be dragged into a process which doesn’t get the outcome you (or your client) want.
So, as 2017 is firmly underway, don’t ignore the second-charge market and make time to understand how it might help your clients. I suspect it will be on your radar a lot more this year and it’s good to have the right relationships in place to be able to deliver in this area.
Steve Harness is commercial director of The Loans Engine