If an adviser receives an enquiry about second charge lending, it may not be their area of expertise.
Instead, many advisers will turn to a master broker to help with a query related to second charges.
Mark Dyason, managing director at Thistle Finance, explains the reasons for turning to a master broker.
“Most brokers are still using master brokers to access the second charge lender. Master brokers have the contacts, understanding and structure to place and complete cases efficiently – this is a regulated transaction so it needs to be done from a position of knowledge and confidence in the advice given,” he says.
Harry Landy, managing director at Enterprise Group, explains: "Second charges do have differences compared with a first charge, and are typically placed with specialist lenders rather than the high street.
"That means it can be as simple as a phone call to refer a client to the master broker, whose team – with their lender relationships and IT systems – can complete the case efficiently and with the best outcome for the client."
Educating brokers
Even after some of the important regulatory changes to the market recently, which have aligned second charge lending with first charge mortgages following the introduction of the Mortgage Credit Directive (MCD) last year, it appears there is still a need for master brokers in the process.
Mr Landy adds: "MCD implementation certainly grew awareness of second charge mortgages. Brokers must at least consider them as options. However, there’s more to do in educating brokers about the circumstances where a second charge might be a better option than the regular first charge options of a further advance or remortgage."
There are signs this is changing as awareness of second charge lending gains some momentum.
Mr Dyason observes: “There has been a wider roll out of direct-to-lender options for brokers looking to develop this part of their offering, and regulatory demands about investigating seconds as a route during capital raising at remortgage should offer more business to the sector.”
But he acknowledges for some advisers, the best option remains relying on master brokers, leaving the adviser to specialise in other areas.
“Also because of changes ever present in the mainstream mortgage field and especially buy-to-let, some brokers are still happy to hand on to a master broker expert for the second charge loans where appropriate, and specialise in the areas the majority of their own business is in,” he adds.
Without much demand for second charge lending, there is little incentive for advisers to brush up on their knowledge of the market as part of their offering and as long as advisers fail to attain any knowledge, then clients will remain unaware of the market, according to commentators to this guide.
