In my 15-plus year career in specialist lending, working in roles as varying as sales, development and distribution, I’ve seen a lot of change.
I’ve seen first-hand how as a result of the house-price boom of 2007-08, the second charge sector has transformed itself to become more transparent and professional. All players in this market are massively dedicated to building trusting relationships that provide intermediaries and customers with the best possible products.
However, we’ve noticed that many of the most common misconceptions have persisted within the industry, proving hard to shake in the eyes of brokers, lenders and customers.
In this post I’m going to challenge five of the most common misapprehensions in the second charge mortgage market; most significantly about the products that the specialist lending sector has to offer.
1. Second charge products are only intended for debt consolidation
One of the things we find when talking to intermediaries and their customers is that many people don’t realise the diversity of our product.
Our loans at Optimum Credit range from £5,000 to £1,000,000,000 and we lend for a variety of purposes: including BTL deposits, home improvements, tax bill payments and in some specialist cases business purposes.
2. Second charge mortgages are complex
There is still a hesitancy around second charge mortgages due to the mis-held assumption that they are complex and only serve customers with some form of adverse credit. Our experience is different from that.
In fact, our customer base has a higher average credit score than that of first charge mortgage holders. The cycle times for a second charge will also point to the process being relatively straight-forward and we continually work to ensure borrowing is seamless and stress-free.
3. Second charge mortgages are only for adverse credit borrowers
Second charges have evolved and whilst there remain a variety of products for customers who have had previous credit issues; there are a huge number of products for Prime customers and rates that reflect their status.
Second charge lenders will sometimes take a more pragmatic view than the typical high-street lender. For example, we consider the length of employment or the time an applicant has resided in their property in a brokers’ application; whereas high-street lenders (by nature) have to consider more stringent criteria when presented with a packaged case.
This more transparent approach is just one of the benefits of sitting within the specialist lending sector; giving customers access to financial options that they may otherwise be rejected for.
4. Second charge lenders want customers with bad credit
It’s a continued misconception that we only look to attract customers with high levels of adverse or significant levels of outstanding debt. This is not the case.
As previously touched on, we facilitate home improvement projects and other large financial transactions that are unlikely to be supported through either an unsecured loan or a re-mortgage. Each loan is assessed in line with MCOB regulations, including the approach to affordability.
5. Second charge brokers aren’t adaptable all-rounders
As mentioned above, second charge brokers are much more than debt consolidation brokers. They have shown a huge amount of adaptability with changes in regulations across the years.
Many brokers have diversified into other product ranges and had a significant amount of success. In our experience, our trusted broker partners are also more often entrepreneurial businesses with a fantastic drive and hugely transferable skill sets.
Tackling the misconceptions
As I’ve shown here, the second charge sector is more diverse, flexible and straightforward than misconceptions may lead you to believe. However, I’m under no illusion that this post is only one small part in helping the industry to overcome these misconceptions.
Optimum Credit will continue to engage with social media and the press to push the second charge market forward. A second charge could be the best outcome in a range of scenarios, and education remains the key to unlocking the huge potential the industry has.
We’re also working together with other lenders to this end and with coordination through bodies such as the FLA awareness has—and will continue to be—raised. A healthy growing market will benefit all lenders and brokers alike, allowing us to deliver positive outcomes for customers.
If you’d like to chat more about second charge mortgages and how Optimum Credit can help your customer’s case, contact Craig Collins on LinkedIn.