Reports of my death have been greatly exaggerated
Tim Wheeldon, chief operating officer, Fluent for Advisers
I bet you didn’t know that crest-tailed mulgara, a pocket-sized predator, once believed extinct, has now been rediscovered in the Australian outback? Perhaps not as earth shattering as discovering that Harry Redknapp has willingly submitted himself to the torture, both for us and him, of ‘I’m a Celebrity, Get Me Out of Here’, but one of those interesting facts that makes people wonder how we can actually lose a whole species?
In the grand scheme of things, it might not seem such a big deal, except to the aforesaid marsupial! The amazing progress of homo sapiens means that we can now get from London to Australia in 16 hours and 27 minutes non-stop but we can’t seem to help knocking off another part of the Earth’s biodiversity as we go.
While we are at it, they reckon there are another five species that have been rediscovered. Omura’s whale is one. You might have hoped that Mr Omura would have been more careful where he left it? Then there is the Coelacanth, apparently some kind of ugly fish over whose reported demise no one would have spilt any tears. The other three include the New Zealand storm petrel, a type of stick insect named after Lord Howe, no, not the late Chancellor of the Exchequer, and finally my favourite, a Mount Diablo Buckwheat – some kind of plant I am told.
“What has this got to do with secured loans?”, you may ask. The parallel I am drawing has much to do with the widely held belief that somehow second charge lending has ceased to be. Certainly, there’s still a body of intermediaries who must think it is extinct, because as far as they are concerned, the only possible capital raising option for their customers is remortgaging.
Amazingly, rather like the Mount Diablo Buckwheat, second charge lending has been alive and well all this time and some have clearly not been looking hard enough in the right places.
How could it be so? After MCD, second charge mortgages came under the same rulebook as their first charge cousins. The FCA may have expected advisers at this point to begin to inform their customers of all alternatives for capital raising. Sadly, this has not been the case. So, because advisers chose not to follow through or provide any more information to their customers, then second charge might as well have been extinct, regardless of whether it could have been a better alternative.
I would hasten to add that I am not anti-remortgages. Far from it. However, it’s frustrating that even though the industry has done a lot of work to remind advisers that our sector is not defunct, there remains much to do to promote second charge lending so that advisers can see where it works.
Far from being extinct however, the FLA announced that not only was new business 11% higher year-on-year, but that it had pushed through the £1bn barrier for the first time. I think that is a highly significant landmark.
Although the sector is dwarfed in terms of size by its remortgage cousin, reaching the £1bn mark will hopefully make advisers take second charge more seriously and that can only be a good thing for promoting healthy diversity in the capital raising market.
There’s much to be said for the principle of natural selection and like the many species, including the dinosaur and the dodo, many have not been able to compete with a changing climate, habitat or predators. However, the second charge sector has not only survived, it is flourishing. Why? It is because it has adapted to meet the conditions it finds itself in. Like every successful species faced with change, it has reinvented itself.
My belief is that second charge business will increase among advisers as they respond to a market that is growing and whose attributes and characteristics bear no resemblance to the sector many think they remember.
However, perhaps because second charge has been ignored as if it was extinct, it has had time to develop USPs which we are keen for intermediaries to understand.
Our sector has proved to be tough and resilient and a survivor. Like the crest-tailed mulgara, second charge lending has surprised many that it is still there and in rude health. My prediction is that we will see further growth in the sector, supported by a growing number of advisers, who recognise the valid reasons where a secured loan can trump a remortgage.
As Mark Twain said on reading his obituary in the newspaper – “The reports of my death have been greatly exaggerated.”