Whole of market mortgage intermediary Moneyquest is launching an introducer service targeted at IFAs who have high-net-worth clients seeking secured loan facilities.
Derek Pollard, sales director at Moneyquest, says the loans advice business they offer is aimed at clients similar to those advised by IFAs who are likely to be financially solvent but have high levels of unsecured debt and which might therefore benefit from a lower interest rate through a second charge loan.
The Scottish-based telephone and internet-based intermediary firm currently earns 90% of its mortgage business from clients ‘south of the Border’ because it specifically targets consumers looking for mortgages worth £150,000 or more.
But the firm is now branching out to build introducer links with advisers – sharing 50% of the commission earned on any deal – through Moneyquest Loans who might not have whole of market knowledge for the loans sector, and may therefore be looking to pass business over where clients are looking for secured loans worth over £35,000.
“A lot of loan advertising tends to be targeted at blue collar workers with a distraught borrowing situation, but there is also a huge market of white collar workers, perhaps with collective debt of £70,000, for example, who are in no way credit distraught but could reduce their credit commitments by restructuring them and then pay it off earlier,” says Pollard.
“In 60-70% of cases, further mortgage borrowing is unavailable from their lender or the borrowing need is above the value of their home, and we would be unhappy with passing such business elsewhere because of the possible pressure to take single premium insurance on it.
“So we have created a secured loans business and built an introducer service, and we have already picked up on a couple of like-minded brokers who are passing business to us. Their clients tend to be people who already have high mortgage levels, perhaps worth £200,000 or more,” he continues.
Pollard suggests secured loans may be useful to clients who, for example, have tie-ins on their current mortgage – preventing them from increasing it any further - and can’t go down the remortgage route, or have a prime mortgage but have perhaps missed a couple of debt payments elsewhere and might therefore be driven into the sub-prime category should they choose to remortgage.
Second charge loans carry a slightly higher interest rate than a mortgage, but still come in typically come at around to 7-9% as a result of the volumes of business it can do, says Pollard – reducing the potential credit interest rate some clients are paying on unsecured borrowing and credit cards from around 13-14%.
There is a requirement on any client seeking a second charge loan to inform the mortgage lender of such a move, but it is unlikely they would prevent a borrower from taking an additional loan unless the client is already in arrears on their mortgage.
Affordability issues are then contained by ensuring the cost of taking a second charge loan amount to no more, on average, than 40-50% of the clients’ disposal income but Moneyquest's own data suggests 85% of clients are looking for second charge loans simply to consolidate existing debt.
In circumstances where the borrowing is likely to be less than £25,000, clients are perhaps better off seeking unsecured lending from Northern Rock, for example, at a rate of 5.9% compared with a secured borrowing rate of 7.9% through First Plus – part of the Barclays Group, according to Pollard, or should consider extending their mortgage where the repayment is a small amount.
He notes whereas lenders might in the past have preferred to attract secured borrowing – therefore offering lower rates for secured lending – the tide has now turned and lenders are offering better deals on unsecured lending where the amount is less than £25,000.
While Moneyquest Loans will handle the advice on secured lending, the firm intends to pass back to the IFA any business which might be suited of the client, such as debt protection, as the firm does not believe selling PPI on the back of loan sales is necessarily appropriate to the client’s financial needs and IFAs would be better positioned to make such a decision.
“We do not rely on the sale of PPI for our profit, as our size and position in the market means we are able to negotiate deals with major loans providers which smaller rivals are simply not able to do,” says Pollard.
“We are all about working in partnership with IFAs to make sure that we get the best for both them and their clients. We offer a totally transparent service, which allows IFAs to track the status of their valued clients’ loans request online at any time.”
If you have any comments you would like to add to this story or would like to speak to its author about a similar subject, telephone Julie Henderson on 020 7968 4571 or email [email protected].IFAonline
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