SPECIAL FEATURE: Seconds fee transparency
Regulatory advancements in the lending industry have reshaped the market, in a bid to make the market more compliant and transparent for consumers. One of the crucial changes requires brokers to provide customers with full fee breakdown upfront. For many brokers, these fees are easy to price-up, but how can brokers make these fees clearer and more justifiable to borrowers for areas of credit less familiar than mortgages, such as second charge loans?
Second charge loans are often regarded as a ‘plan b’ behind first charge mortgages. Rates tend to be higher than mortgages, but the gap has now begun to narrow, with many upsides including more generous affordability calculations, easier income proof and a general industry move to help borrowers with adverse credit.
As the market grows, many consumers need to be made aware of not only the benefits of this sort of loan, but a full breakdown of fees and all associated costs to ensure this option gains the customer’s trust as a valid borrowing option.
The Financial Conduct Authority states that brokers are required to disclose the existence and amount of a fee or commission upfront. Normally a fee is added to the loan which covers the broker’s processing costs, which can include valuation, consent from the first mortgage, land registry costs and credit searches. Processing costs can be significant meaning that sometimes a large fee needs to be added to the loan.
As this type of lending is arranged through a broker, it is vital that customers benefit from the knowledge of the broker and receive the best-suited loan available. By specifying fees, brokers are not only ensuring that their customers are presented with the best product for their circumstance, but is also allowing the seconds market to become a more reputable and viable options for borrowers.