At Hayes Finance we’ve seen a sizeable percentage jump in our customers taking second charge loans, rather than remortgaging.
However, this increase is not being replicated across industry. Why is that? Why are we concerned if our competitors are not guiding customers appropriately? That’s because we want to alert potential buyers of the availability of the facility, rather than the costly and often complex remortgaging approach.
It’s true, for years’ brokers and lenders didn’t want to touch second charges with the longest barge pole. The reasons will differ from broker to broker, lender to lender. However, most commonly the reasoning can be traced to a lack of education and therefore misunderstanding of the product being sold. This led to a lack of transparency from the lender/broker. The lack of regulatory control was also missing. This meant the image of mortgage lending was hardly improved. However, times they are changing!
When the Financial Conduct Authority (FCA) brought in strict regulations in March 2016 to address the lack of clarity amongst lenders it initiated a tidal change of use and understanding. Information and permission to sell second charge mortgages stood the opportunity in firmer stead. Members like Hayes Finance are now more than equipped to offer second charges. The fact finding we would undertake when understanding your needs will include a second charge loan option. The disclosure we can provide will leave you in no doubt about positives and negatives of each option on the table. At Hayes Finance, we are very happy to present second charge mortgages as a viable alternative. This is in total harmony with the FCA’s insistence that second charges are offered, where possible.
Much has been learnt across industry, financial institutions and Government from the credit crisis of 2008 where loans and mortgages were offered to those who couldn’t afford them; this brought the shortcomings of lenders into sharp focus. With improved education, regular stress testing of all lending facilities and enhanced processes means more brokers and lenders should be offering all options to consumers. It is after all a buyers’ market.
Consumers are more knowledgeable than ever before. We are delighted when our customers come to us having completed their due diligence beforehand. That said, we are also very comfortable advising all consumers on the best for their needs who are unsure on the options available to them who may be unsure of their requirements what the best options for them are.
Does any mortgage war cause concern for second charge mortgage applications?
You might have read that Yorkshire Bank have introduced a headline grabber, pocket squeezing 0.99% interest rate mortgage. That said, there is no relation between the two. Second charges are a viable and often, extremely attractive, alternative to a remortgage if, for example, your credit score needs repair.
This is a good opportunity to outline the benefits and considerations of second charge mortgages:
- Being self-employed is in the spotlight. This is as much to do with Philip Hammond’s botched Spring Budget recently. However, if you’re self-employed a second charge can offer you a way to use your home as security to get a loan.
- Whether you’re employed or self-employed, you can typically pay back a second charge over a longer term.
- If you’re credit history is holding you back, a second charge loan can offer you a period of credit repair.
Considerations of second charges:
- You’ll have two lots of mortgage debt to repay. With a remortgage it will all be wrapped into one payment.
- If your credit rating isn’t good, you’re likely to pay a higher rate of interest (40%+) on the second charge mortgage than for an ordinary secured loan.
(source: https://www.lovemoney.com/guides/16982/second-charge-mortgages-homeowner-loans-pros-cons )
To discuss your options, call the team on 020 3126 4898 or email email@example.com