Secured lending was the preferred option for homeowners looking to borrow money last year, according to Alliance & Leicester. A recent survey by the Association of Finance Brokers (AFB) also found that around half the mortgage advisers it questioned said they now offered advice about homeowner loans. So if you are not currently offering a secured loan service, why not?
It’s not as if there is not a great choice of both product and lender. Despite some recent lender closures due to the credit crunch, there has been an influx of new entrants over recent years. This made the established players buck up their ideas and they have been forced to review and update their client offering.
If you have not yet dipped your toe in the second charge sea then it might be due to concerns about business practices in the sector. It’s true that the secured loan market is not currently fully regulated. Second charges are regulated up to £25,000 under the Consumer Credit Act (CCA). The CCA will not begin to really bite until 6 April 2008 when the £25,000 ceiling will be abolished. That effectively means all new second charge loans will be “regulated” from then. But as a mortgage adviser you are in an ideal position to look at the client’s needs and circumstances and identify whether a traditional remortgage or a secured loan would be most appropriate.
Before entering the sector, advisers should make every effort to make sure that they deal with a reputable packager to make sure that the client is getting a decent product at a rate that meets their needs. Choose one with a senior management team that has been in the business many years and has a close relationship with the senior people at the lenders and can therefore ensure a better service. Advisers need to have the ability to search for the best solution to a client’s needs so the right packaging partner is key. If not, they run the risk of falling foul of the FSA’s edict on treating customers fairly.
Indeed, the secured loan market owes some of its recent resurgence and popularity among mortgage brokers to the FSA’s regulatory regime. Advisers, too, are now much more aware of the importance of the secure loans sector to many customers as they carry no upfront fees, valuation or solicitor’s costs. Loan-to-value options go up to 125% and deals are available up to 100% on a self-cert basis. Unlike first charge lending, retentions and undertakings are rarely required and loans can often be arranged and paid out more quickly than it takes to remortgage. So, secured loans can provide an ideal solution for clients while at the same time creating a valuable additional income stream for advisers.
David Burrows is managing director of Secured Loan Services.
The views expressed in this blog are those of the individual and not necessarily those of the company he represents.
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