Fluent: A resurgent second charge sector owes much to its regulated status

10 July 2019

Fluent for Advisers, the intermediary focussed division of Fluent Money Group, believes that not enough credit is given to the role that regulation has had in making the second charge sector the success it has become over the past eighteen months.

After the credit crunch, second charge mortgages along with the rest of the lending market were barely treading water, according to Fluent’s Head of Intermediaries, Jeff Davidson.

He said, “While the first charge sector picked up, progress was slow in the second charge space, even though there was clearly a need for such a product as a more specific, faster and shorter term alternative to a remortgage. It cannot be underestimated how much the sector owes to the implementation of the MCD in 2016 and the formal recognition by the regulator that a second charge mortgage could be a valid choice for people seeking to raise capital from their properties.

I am in no doubt that the regular monthly increases in new second charge mortgage business which we have seen in the past twelve months, flow in part from the Mortgage Credit Directive (MCD) of 2016 and the knock on effects of becoming formally regulated. With the FCA taking over the direct regulation of the sector, it began the process of legitimising the status of secured loans, ensuring that a second charge mortgage should be treated as an acceptable alternative option to a remortgage or further advance.

Jeff added, “It has taken time, but new business momentum is building as demonstrated by the increasing numbers reported by the FLA, which has seen regular month on month increases in volumes. Lenders and distributors like Fluent for Advisers have also put in the time to educate and inform adviser firms, but the MCD gave advisers the confidence to reconsider second charge mortgages by legitimising the sector within a formal regulatory framework. It has probably been the biggest single factor in re-establishing second charge mortgages in the minds of advisers and their customers.”