Precise Mortgages, the specialist lender, has today announced that it is launching a direct to broker second charge proposition on 5th May 2016.
The addition of a direct submission route alongside its newly streamlined master broker panel will give mortgage intermediaries more choice in how they submit second charge lending cases.
Second charge lending is a growth market with excellent opportunities for mortgage intermediaries. The FCA states that it expects the vast majority of second charge sales to be on an advised basis – this is undoubtedly an area where intermediaries excel.
The fact that second charge loans are now regulated by the FCA under the MCoB regime means that the advice and lending processes for second charge loans should become as straightforward as in first charge lending.
In order to ensure mortgage brokers and advisers are properly compensated Precise Mortgages has set the procuration fee at 1.25% for direct business which aligns the fee to a similar level as if a remortgage had been advised.
Customers who wish to raise extra funds may be better off leaving their existing mortgage in place and using a second charge loan instead include:
• Customers on lifetime tracker rates paying low margin over BBR
• Customers with an interest only mortgage
• Older borrowers who may not pass affordability tests on a remortgage but may be able to pass with a second charge on a different term
• Customers trapped with lenders who will not allow further advances
Highlights of Precise Mortgages new second charge loan products:
• Rates from 4.45% with a £300 product fee, or 4.75% with no product fee
• Bank of England base rate lifetime trackers and fixed rates
• ERC and no ERC product choices available
• Affordability on 5 year fixed rates is based on initial pay rate not a stressed rate
• Residential Prime, Almost Prime and Near Prime ranges
• Buy to Let Prime
• Loans from £5,000 - £1,000,000 (loans above £500,000 priced on request)
• Terms of 36 to 360 months
Alan Cleary, Managing Director of Precise Mortgages says: “We firmly believe this direct to broker second charge proposition will improve the choices available to the mortgage intermediary market and to the end consumer. We are in talks with many major mortgage clubs and networks about bringing this opportunity to as many brokers and advisers as possible and anticipate making a number of announcements very soon.”
Despite numerous government schemes aimed at supporting the UK’s first time buyers and renters take their first steps on the property ladder, a significant proportion of these renters are still unaware of the assistance available, according to research from Precise Mortgages in conjunction with YouGov.
Over two fifths (41%) of people in the UK have a low awareness of the government’s Help to Buy ISA, which launched in December 2015. More than a quarter of people surveyed (27%) admitted to not knowing much about the ISA, whilst 14% stated they had never even heard of it. A further 13%, despite knowing about it, don’t think it is enough to help people buy homes, and greater government help is needed.
The announcement of the proposed Lifetime ISA as part of last month’s Budget was greeted with much interest, with many industry commentators suggesting that it could incentivise under-40s to think about saving for either a home or retirement. However, with such little knowledge of the Help to Buy ISA – which is set to last until 2019 – it unclear whether the Lifetime ISA will actually reach the people who it could benefit.
This is all the more concerning when saving for a deposit remains the biggest barrier for renters when thinking about home ownership. Over half of renters (51%) still see saving a large enough deposit as the biggest barrier to owning home. This is followed by finding an affordable property (41%) and getting a mortgage approved (33%). Additionally, 37% of UK renters state that they are not currently seeking to purchase a property simply because they can’t save for a deposit.
Alan Cleary, Managing Director of Precise Mortgages says: “Barely a month ago, the Chancellor announced the introduction of another initiative to help first time buyers. The Lifetime ISA will see the government gift £1,000 to savers who can put away £4,000 a year. It’s clear from this that the government is trying to support first time buyers up and down the country to access the property ladder.
“However, better communication of the support available is needed – if the message isn’t getting to people it needs to, it follows that some of these people will be missing out on help that could prove vital in helping to get them on the property ladder. More must be done by the government and industry alike to increase the knowledge of these schemes across the board, not just amongst first time buyers, but also those who they turn to for guidance when thinking about saving to purchase their first property.”
All figures, unless otherwise stated, are from YouGov Plc. Total sample size was 4288 adults. Fieldwork was undertaken between 28th August - 1st September 2015. The survey was carried out online. The figures have been weighted and are representative of all UK adults (aged 18+).
Simon Carr, Sales Development Director
Whilst working on a marketing initiative, a colleague and I were discussing when a second charge bridging finance would be used over a traditional first charge bridging product. It was a discussion which, after visualising different scenarios, we were able to succinctly differentiate why and when a second charge bridging loan would be used.
I once read a book, by Stephen Covey – you know the one – ‘The 7 Habits of Highly Effective People’. What a great book – it's more of a reference manual really – one that you don't just read and put down, but pick up from time to time.
The first couple of chapters focus on changes in opinion and perception, and using a number of pictures, clearly demonstrate what is being taught. One picture is of a beautiful lady wearing a fur throw, pearl necklace and earrings.
The other (which quite frankly still scares me, even today) is a picture of – shall we say a rather old lady, who's seen better days. I can tell this by her unfeasibly large, hooked nose – a marked comparison to the dainty, little button nose of the elegant lady.
Later, you’re shown another picture. However, as your learning grows, you see the image change from old lady to beautiful lady or vice versa, depending on what you saw initially.
Attributed to William Ely Hill (1887–1962) („Puck“, 6. Nov 1915) [Public domain], via Wikimedia Commons
What do you see? Old lady… young lady... or both?
This change in view is referred to as a PARADIGM SHIFT – the minute you see something from a different position. I guess that my discussion with my colleague gave me my very own paradigm shift. I realised that on the 21st March the residential first mortgage and second charge industries changed, becoming one single picture, if you will, after being seen as separate for many years. Perceptions changed for the better. Let me attempt to demonstrate.
Picture 1: Mortgage Agreement
Picture 2: Secured Loan Agreement
Picture 3: Regulated Mortgage Contract
You can no longer ignore Picture 3 – it contains both... watch… stare… give it a go!
Old Lady/Young Lady First charge/Second charge
You are considering both aren’t you?
In summary, same type of contract, same pen, same security – just a different view of the same thing.
See – I rest my case.
Paradigm shift shared.
My work here is done!
I can’t wait for the 23rd June! I am hoping that once the vote is cast the uncertainty will start to subside and the media will have a different topic to write about. Whilst I am getting slightly bored of the Brexit debate I do fully understand how important the outcome is to every man, woman and child in this country.
Even if you have no interest in whether we stay or whether we go you will be impacted by the outcome. I personally think that the arguments being put forward by politicians on both sides of the debate are, quite frankly, indecipherable. Neither side is saying anything useful that the average person on the street can use to make up their mind and I fear this is only going to get worse as we get closer to the vote.
I decided quite a while ago that I was not going to rely on anything being said by politicians as to how I am going to vote on Europe. As a result I made my mind up ages ago and now I am pretty much ignoring the media. There are two things I think about when weighing up how to vote: first, how will the outcome effect my family, and secondly what will be the impact on the country. In reality the second is how will the effects on the country affect my family, so it’s all the same thing really. I honestly do not know whether it is better in the long run to exit or stay and anyone who says they know is either a liar or deluded. However, I am firmly in the remain camp and here are my reasons why.
I, like you, work in the mortgage market and one thing that the mortgage market does not like is uncertainty and an exit would bring years of it. Bear in mind it took Greenland, which has a population roughly the same size as St Albans, over 3 years to decouple from the EU’s predecessor in 1985. It is therefore, highly likely it will take the UK considerably longer.
As part of my job I speak to institutional investors and capital markets people regularly and without exception every one of them has asked us for our views on the impacts of an exit and what are we doing about it.
These are the people that help fund the mortgage market and indeed to some extent are price setters so uncertainty for them is not a good thing. Our response as a business is that it is impossible to anticipate the first, second, third, fourth order effects of an exit. However, the one that is most troublesome is a significant drop in the value of Sterling leading to rapid rate rises; this would hurt mortgage borrowers, lenders and intermediaries alike.
The UK is simply too small to compete with other countries. Whether it be defence or economics we are competing with 1.5 billion Chinese people, 1.5 billion Indian people, 350 million Americans and 700m Europeans if we decided to exit. In nature there is generally safety in numbers.
The country’s weighted average age is increasing as we live longer. Without young people, whose National Insurance payments will fund the state pension? Where are all the nurses, police, plumbers and construction workers going to come from? The fact is that in order to maintain or improve living standards a country has to grow in the long run and growth takes people. Positive net migration is crucial and by closing our borders we potentially become insular and irrelevant as a nation.
I am also ignoring the polls which so spectacularly got their numbers wrong on the outcome of the General Election and the Scottish vote. Instead I look at what the odds are at the bookies as they have their balance sheets on the line if they get it wrong. Odds for us staying in the EU are 2/5 giving an implied probability of 71.43%.
Simon Carr, Sales Development Director
It's like the remake of an epic blockbuster.
Let me take you back to 2007-2008, when several unprecedented events converged to create what some economists have described as the worst global financial crisis since the Great Depression of the 1930s. This was a time when the UK mortgage intermediary market felt the impact by watching lending criteria tighten.
In 2009, the regulator announced its intention to review the mortgage market and sought to introduce a stable and sustainable responsible lending environment. The result of the review introduced changes in 2014 which saw the introduction of robust affordability checks, ensuring customers could afford payment commitments to their secured debt, both in today’s low rate environment but also as interest rates increase. Additionally, in what should now be seen as a positive step, the regulator introduced the requirement for advice to be mandatory on mortgage sales. The latter saw direct to consumer lenders suffer delays to service, resulting in more customers seeking advice from mortgage intermediaries.
In this sustainable environment, we have seen the availability of products increase and perhaps, more importantly, demand for independent advice taking a strong hold.
But it isn't over… the story continues and on 21st March 2016 (this date being the deadline) another event is set to signal change. Your battle for independence will be challenged. Changes brought about by the European Mortgage Credit Directive (EMCD) and applicable changes to the Mortgage Conduct of Business (MCOB) mean that you can only be truly independent if you consider the entire market as part of your advice process.
So what's the problem? Initial disclosure requirements mean that you must define your scope of service - if you don’t offer products representative of the market you may find that you cannot continue to use the title “independent”. What is clear is that many mortgage intermediaries have considered what this means and recognised that for those customers looking to capital raise, they should be considered for a second charge as well as a remortgage. After all, a remortgage and a second charge are both described by the regulator as a ‘regulated mortgage contract’.
What's clear is that Principles 6 and 7 set out high level standards when considering the needs of your customers. MCOB 4.4A describes your obligations during initial disclosure and further describes what is considered to be independent.
For those mortgage intermediaries who have already considered their scope and requirement to offer second charge loans, I am sure that you will have made your own arrangements. Alternatively, you will have approached your mortgage club (if directly authorised) or engaged with your network (if an appointed representative) to discuss your requirements and source the correct solution.
We all resist change – it is after all human nature. Many see change as a negative, but others see it as a huge opportunity.
The Mortgage Market Review and the EMCD bring about sustainable market conditions and drive sound customer-centric outcomes. The changes in the regulation of second charge loans and how they are treated give you an opportunity to provide the right solution for your customer. If you don’t have a solution in place, speak to a mortgage club or your network and voice your concerns regarding the products you would like to offer and ask for their assistance.
It’s not quite 4th July, but 21st March heralds the day of Mortgage Independence.
The next thing you know, we’ll all be talking about the resurgence of the second charge market. Now that's a film I'd watch!