I am being asked how the second charge market will respond to the implementation of the Mortgage Credit Directive (MCD) and while there is a challenge for all of us to come to terms with change, the ultimate goal is to see ‘seconds ’ completely integrated into the advice cycle of every adviser. I can only see that as a worthy goal, as ultimately it means that ‘seconds’ begin to be treated with the same seriousness as the rest of the lending market and take their place as a valued part of the lending sector.
There is still plenty of detail awaited from the regulator, but there is nothing that has not been telegraphed already from the implementation of the MMR earlier this year in the mortgage market. We know that lenders will be expected to look at their affordability calculations and stress testing will become an integral part of the process, but it is clear that many of our lenders are already in the process of tightening their criteria and when the full implementation takes place I am sure we will have got used to the changes.
Will it lead to a dip in volumes? The FCA certainly thinks so. I prefer to think that while there might be a blip, the upward trend in volumes will recover. As all advisers will have to include second charge in their research for capital raising clients and more of them begin to realise how much better a second charge loan can be in many cases, I think that will have a strong upward effect on business. Also, although there is some way to go, harmonisation of the process from enquiry to completion will be more closely aligned with first charge mortgages that will add a degree of confidence to those advisers who have been put off in the past by consideration periods and a different regulatory regime.
We are all apprehensive about change, particularly in the seconds market, which has already undergone such transformation in the past ten years. However, the outcome we are working for is to make a level playing field in which second charge lending can take its proper place at last.
Bradley Moore is director and head of second charge at Brightstar Financial