A personal belief is that a second charge loan is and probably always will be a substitute product for unsecured and mortgage debt. I do not believe that many people wake up in the morning and think: “I know, I need a secured loan!”
They do, however, wake up worried that they will not be able to meet all of their credit payments this or next month, that they would like to increase their living space without moving or complete some essential repairs to their home.
This becomes their primary need and whatever that is, home improvements, consolidation of debt or any other purposes, the first goal of the customer is to satisfy their immediate requirement.
The likelihood is that the customer will then seek to identify the most expedient and familiar route to satisfy their debt or achieve a goal, and to provide a solution to their financial need.
It could be argued that herein lies the two key issues that we as a sector face: consumer knowledge of our products and speed of delivery when compared to alternatives and better-known solutions.
The good news for the sector is that the FLA recently reported that the second charge mortgage market made an impressive start to 2019, with new business up 31% by volume and 25% up by value in March compared with March 2018 – the highest level of monthly new business volumes since October 2008.
This is a strong performance, and suggests that knowledge of second charge mortgages among brokers and their customers is improving.
However, expediency and good customer service is something very close to my heart and this is where technology has and will continue to have a profound effect. Yes, the product has to fit the market, but distribution is also key in this regard and it’s improving service and speeding up delivery.
I have no doubt that the customer’s first port of call in many cases is a search engine, comparison site or their own bank via online banking. The technology here has matured and the customer’s needs can be satisfied relatively quickly where they pass the criteria for a product and or the behavioural scoring systems utilised. In most cases the customers own bank and or the unsecured sector can, in best case scenarios, supply loans to the customer within 24 hours, sometimes quicker. Depending on who you talk to a secured loan can take as long as four to eight weeks to get to Binding Mortgage Offer (BMO).
There are limitations here such as product restrictions, maximum lend, maximum term and or the rate available may prove to be more expensive than initially anticipated.
That said, in the customers mind set immediate gratification sometimes outweighs the need to research the unknown and or in some cases the price, let alone the extended processing times for alternatives such as re-mortgage or second charge loan. My personal belief is that our customers have often passed through this journey prior to reaching us. Could the answer have been given to them sooner if the means to distribute were better? I think probably yes.
As a business Equifinance has started along the process of developing and providing products and solutions that are real alternatives to the unsecured and re-mortgage market. So far, we have concentrated on those consumers that are excluded from main stream solutions.
During this journey we have also gained an understanding of the potential for technology to enhance distribution by means of expediating a lending decision, including; API and integration with business partners, AVM suppliers, credit reference agencies and soon the Holy Grail an electronically signable mortgage deed. All of which we intend to take full advantage of in due course. If, and it’s still an if, all of these technologies can be incorporated into one system, surely and instant BMO cannot be too far away.
Advancements in technology and systems continue to develop and they can, do and will assist in speeding up underwriting and deliver operational efficiencies, leading to expedient acquisition along with an improved customer experience.
Detailed MI from the use of the systems also provides an ongoing stream of analysis of the loan book that can help us develop process improvements and new product criteria and lending solutions designed to cater for the varying needs of the consumer.
Tony Marshall is managing director of Equifinance