The Intermediary – February 2025 - Flipbook - Page 52
T H E I N T E RV I E W
Equifinance
could provide higher loan amounts – may find
that their lender is not willing to lend due to
criteria or loan purpose, or that they have high
early repayment charges (ERCs) on their first
charge, and it could “cost a fortune to get out
of it.”
It is rare to get a second charge customer
who has not already applied for different
products elsewhere during the journey.
While there might be good reasons to push
for better education of consumers to bring
second charges to the front of their minds,
to better ensure they ask their brokers about
these options, Marshall warns that this market
“hasn’t got a megaphone loud enough” to do
this kind of out-of-market campaigning.
The fact remains that there are assumptions
made about seconds, including among brokers,
and indeed those investors buying bonds, as
Marshall points out. One such assumption
might be the residual sense that a borrower
opts for a second because they cannot get a
loan elsewhere for negative reasons.
There is no quick fix to instantly prove to
borrowers, brokers and the wider investment
market that these products are tools like any
other, built to fit certain circumstances.
Marshall says: “It’s difficult, because this
market is not of a size yet – in terms of volume
or origination – to form an impression and
voice this balance to the consumer. The
customer needs to be educated when they
get here – you can’t have that kind of complex
conversation via advertising and marketing.
“The only way this is going to happen is, over
time, with better acceptance of the product,
along with mortgage intermediaries becoming
more familiar with it. It’s a combination of
education and the way we distribute second
charges as lenders. There’s no short-term
panacea.”
One of these factors will also be seeing more
household names entering the market, as well
as larger second charge lenders becoming
better known in the consumer sphere. This will
likely, over time, lead to greater acceptance
of seconds as part of the overall fabric of the
mortgage sector.
Carrot and stick
In addition to continuing the work to raise
the profile of this market, part of the picture
for second charge growth is the impact of
Consumer Duty. An overall emphasis in the
market on the importance of considering all
options open to a customer means seconds are
naturally coming more to the fore as brokers fit
to new regulatory demands.
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The Intermediary | February 2025
However, Marshall says positive growth
cannot be spurred on by the “stick” of regulation
alone, and that to gain real buy-in, this market
must continue improving its appeal, and its
processes.
“How we distribute these products, as
lenders, is naturally a little convoluted,”
Marshall says. “Consumers just want to click a
button and submit their payslip, an easy route
to get to the product – but it’s not easy to get to
a second charge product. We’ve got to work on
all of those things.”
One sticking point is that in comparison to
going to a bank and accessing pre-approved
funds of, say, up to £20,000 and having near
instant access to the money, a second charge
of the same amount will potentially take six to
eight weeks to turn around.
This difference is caused by a number of
factors, including regulation and the necessity
of having more processes in place for this type
of lending, but Marshall believes that it is also
due to “the fact that we have not developed
our distribution systems to the level that the
unsecured market has.”
While secured loans naturally necessitate
greater oversight of lending decisions, there
is work that can be done to make this process
smoother and more appealing, thereby making
it easier for brokers to advise their clients, when
the deal is right.
Marshall says developing IT solutions is key,
to provide “instantaneous decision-making,” as
is implementing greater flexibility on valuations.
Due to the risk to the consumer of securing
a loan on their property, there must be
“some kind of manual process” as part of the
underwriting, but this does not mean that the
seconds market cannot benefit from greater
automation.
“We do from time to time see a case arrive,
offer and complete in 24 hours – so it does
happen,” Marshall says.
When it comes to continued misconceptions
or doubts around the validity of this product
or market, much of tackling this comes from
simply continuing good practice.
“There is no one in this market that I am
aware of that doesn’t want to do the right
thing,” Marshall says.
“As long as everyone maintains that stance,
acts professionally and provides the products
to consumers with that culture, over time that
stigma – if there is one – will drop away.”
Some of these misconceptions lie with
mortgage advisers, as many have “never bought
into the concept.” While Consumer Duty makes
it more of an imperative to factor in these
