Mortgage Solutions, 29th April 2014, A look at the secured loan regulatory shake up
It has been a particularly busy start to the year for brokers and lenders alike.
At the moment all eyes are on the Mortgage Market Review (MMR) with lenders adjusting their systems and processes and brokers explaining the new changes to their clients.
However, while MMR has been dominating most of the headlines another significant change to the regulatory regime also came in to force this month. On 1st April 2014 responsibility for the oversight of consumer credit shifted from the Office of Fair Trading (OFT) and has been taken up by the Financial Conduct Authority (FCA). This change has not generated as much attention as MMR but in many ways it is equally significant.
Traditionally there has been reluctance from many brokers to look at secured lending as a viable alternative to re-mortgage products. Intermediaries have cited a number of reasons including nervousness around the compliance implications of secured lending products right up to a lack of understanding of secured lending altogether. However, in recent years at The Lending Wizard and in the wider industry we have seen these concerns slowly diminish, and rightly so.
Recent figures showed that the second charge sector had its best month in nearly four and a half years in March 2014. Clearly more and more brokers are considering secured lending and by bringing regulation of the secured loan sector under the auspices of the FCA it is clear that the regulator is seeking to create ‘one mortgage market’.
Quite rightly the focus of the FCA is to safeguard the consumer and within reason ensure the most appropriate customer outcome is achieved. By giving the secured lending sector its own oversight it is sending a very clear message to brokers that in many cases the appropriate outcome for a customer may well be a secured loan .
This is especially true when you consider the changes brought about by MMR. In many cases re-mortgage applications will be subject to greater scrutiny which, for a variety of reasons, may make that option less palatable for certain borrowers and the brokers working on their behalf.
Affordability and suitability for secured loans is obviously checked rigorously too but there can be any number of reasons borrowers would prefer not to disrupt the status of their current mortgage and opt for a second charge loan.
It is clear therefore that a secured loan should always be considered as part of a holistic service provided by brokers. That is even more important when you consider the number of competitive secured loan products that are now available. If intermediaries aren’t doing it already, they need to be looking at secured lending seriously as part of all the options they suggest to their clients.