In the time since MCD, I have made dozens of presentations and been involved in countless conversations with brokers about all things second charge. One of the first things I tend to do is talk about secured loans rather than second charge mortgages. Not only is it a term with which brokers feel more comfortable, but as many have told me, so do their customers! Mentioning second charge mortgages to customers was met with plenty of blank looks, while talking about loans was more readily understood.
Funny what changing a few words can do, isn’t it?
There have been a number of recurring themes that brokers keep coming back to and I thought I would share the most common ones.
Too expensive – No
With rates from under 5%, it can no longer be argued that a secured loan could be called expensive. A secured loan lender does take a second charge and therefore added risk, so the rates charged tend to reflect that extra risk.
Too complicated – No
There used to be some truth in that secured loans were administered differently than first charge mortgages, which could lead to confusion if they were not explained properly. We also had some pretty impenetrable rules on working out early redemption that did not help the cause. All of that is gone now and has been for some time. Secured loans are now probably the most transparent and simple products to understand and speak to customers about with conviction.
Too slow – No
Prior to MCD, there was a 14 day cooling off period during which lenders and brokers could not contact their client once an offer had been made. That has all been replaced with a 7 day period of reflection starting from the moment a binding offer is made. However, a client can opt out and complete the deal at any time.
The important thing that needs to be remembered is that the argument around whether secured loans are ‘better’ than remortgages or vice versa misses the point. Both methods of raising capital have their strengths and weaknesses. As advisers, rather than favouring one method over another, we recognise that our job is to make sure that customers are getting the benefit of a ‘whole of market’ approach that plays no favourites, so the advice received is unbiased and completely in tune with their needs and circumstances.
Jeff Davidson is head of intermediaries at Fluent for Advisers