The 1 April deadline has now passed without too much fanfare or ceremony as the second charge regulatory baton has been passed smoothly from the OFT to the FCA. Of course this particular baton change does not yet mean full integration into the wider lending arena as second charge lending is still not eligible as a regulated mortgage product for another two years. But that doesn’t mean we won’t see some element of change.
Up until the 1st April, here at Brightstar, we worked hard preparing for new procedures, systems and documentation to ensure we were ready for the upcoming changes and challenges. This groundwork has resulted in a relatively painless transition with little impact on our introducing brokers and turnaround times on new, as well as, existing applications.
In the first few weeks post deadline it has to be said that we’ve experienced little in the way of sweeping change. However, we’re also firmly of the belief that much like the runners in the recent London Marathon, those who have put in the hard yards during the lead up will be a) more confident on the start line and b) have the reserves in place to stay ahead if the going gets tough. And there seems little doubt that it will be those brokers and packagers who have adapted and are prepared to evolve following FCA regulation who will be the main beneficiaries from increased levels of second charge business going forward.
Let’s just take this opportunity to pin our colours to the mast and say that we believe regulation to be a good thing. It works to align the second charge with the first charge market. It will increase opportunities for switched on firms and for a variety of brokers who may have previously ignored or didn’t fully understand the benefits attached to second charge products. Plus best advice means that the intermediary market has to consider seconds as a genuine, and highly valid, alternative to remortgaging for certain clients.
Regulatory modifications have meant that lenders are now making sure all brokers and introducers hold the relevant permissions to offer advice on second charge products, and rightly so. This can only strengthen the rise of this sector as a justifiable option to consumers. Inevitably this will also mean more lenders with a keener eye on the market, which in turn will lead to increased competition and better rates. A win-win situation for everyone.
Unsurprisingly there is currently little in the way of new product launches as lenders take time to assess the situation and any potential fallout concerning this regulatory change. However, this is not a sector that sits still for long and I expect an increase in activity and competition in the not too distant future.
Bradley Moore is director of second charge at Brightstar Financial