Tony Marshall is managing director of Equifinance
The remortgage versus second charge debate continues to divide opinion. Fortunately, it is still relatively civilised. Cancel culture and Twitter extremists have not yet tried to shut down debate or issued social media fatwas against one or the other point of view.
Apart from the fact that different types of mortgage are unlikely to raise the collective blood pressure enough to bring that about, I like to think the reason is that extremism has no place in our industry.
Most advisers with an interest in the topic are even-handed enough to concede that each proposition has its plus points, whether they use both methods of capital raising or stick rigidly to one or the other.
Of course, I would like to see more advisers overcoming any historical antipathy to second charge borrowing, and I have to believe that the further we progress, the less resistance there will be.
I am hopeful that the upcoming results of the Financial Conduct Authority (FCA) review will be positive. It is likely there will be more consultation over fees and charges and the appropriateness of advice. The resulting report might also look at distribution methods of second charge products and give increased attention to credit consolidation and its justification.
I believe that it can only be beneficial to have some of these issues aired, as it will provide greater clarity and might also remove some of the myths that prevent advisers from engaging.
As second charge lending has been under FCA purview for some time, I would like to see the need to have separate permissions to provide advice on first and second charge mortgages abandoned, or at least streamlined. Both products are similar and fall within the same regulatory framework, and often complement each other.
a good fit for the
With the sun beginning to shine more, Spring is officially being met with a rush to DIY stores.
In fact, one of the few bright sparks during lockdown has been the DIY market, and second charge mortgages have traditionally played an important role in funding home improvements.
As not everyone has been on the trail of a second home in Cornwall, adding value to principal residences by extending property or putting in new kitchens, for example, will grow – as will demand for simple additional finance to pay for changes.
Interestingly, the success of longer fixed-rate terms on first charge mortgages has made remortgaging in the face of early repayment charges (ERCs) much less attractive, whilst a second charge loan can provide a simpler, more elegant solution.
Same day offer for a quirky case
Lastly, a reminder of what second charge lending is particularly good at. When the need for finance is acute and the client and introducer work with us closely, second charge lending provides solutions that cannot be matched.
Our introducer was approached by a family wanting to raise capital to pay for their mother’s funeral. She had taken ill and died from COVID-19, and there had been no provision made as it was completely unexpected.
In the current climate, understandably, the funeral home required expedient payment up front. Having had no luck from their bank, the family approached our introducer.
With a very short period of time to secure funding, we were then approached.
Due to the substantial equity in the property, the immediate availability of income verification, and an automated valuation model (AVM), we were able to issue an immediate offer.