The second charge loans market will more than double in size within three years, according to The Lending Wizard.
The loan sourcing tool says its predictions are based on three central trends: historically high growth since 2011, improved awareness of the consumer credit industry among both borrowers and intermediaries following the FCA’s assumption of control over this sector and the implementation of the upcoming European Mortgage Credit Directive.
Historic data shows that the secured loans industry has averaged 130% growth over the past three years, even before the recent changes to the market came into effect. However, a recent poll The Lending Wizard conducted at the Financial Services Expo revealed that 73% of intermediaries who responded have been feeling more confident about recommending secured loans since the FCA took over from the Office of Fair Trading, suggesting that this growth is likely to exceed previous trends in the months ahead.
Under the European Mortgage Credit Directive, second charge loans will be brought in line with mortgages in terms of regulation, qualification requirements for second charge firms including intermediaries and increased flexibility in product design for lenders. All of these changes will help push the second charge market into the spotlight, whilst improving its credibility and range of applications, the Lending Wizard said.
Gareth Broome, senior business development manager at The Lending Wizard, said: “In the past, secured loans were often seen as a fall-back product, and something outside the comfort zone of many brokers. Over the past few years however, this has started to improve. The changes under the FCA have had the dual effects of positioning secured loans as a mainstream lending product and tasking brokers with the explicit requirement to carefully review all the options in order to be certain of offering the best advice. For example, a secured loan could well be a suitable alternative for people who are unwilling to disrupt a great deal already in place on their current mortgage.
“We expect the European Mortgage Credit Directive to accelerate the changes we’re already seeing, encouraging intermediaries to make a considered appraisal of the alternative options available to them and ensuring that second charge loans are one of those options. Taking into account these advances and the already promising trend of growth, it’s realistic to imagine the sector breaking the £1 billion mark in two years time.”
