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Second charge packagers facing death knell

Master brokers and packagers that have relied on fees of up to 10% on second charge loans face annihilation or a complete business remodel.

Chris Fairfax, managing director of Positive Lending, has claimed that the dawn of direct to broker second charges means master brokers and packages will have to “completely rethink” their business models.

He said: “We have known about lenders taking their second charge offerings directly to networks and ARs for a while now and as such, have considered how we model our business so that it is fit for the future.

“Earlier this month we confirmed that we would charge a flat fee of £995 to all clients, regardless of their loan size. Brokers also keep 100% of the proc fee.

“The reality is that post-Mortgage Credit Directive the environment has changed and there is no way an adviser is going to recommend a second charge where the client is being charged up to 10% fees.

“We believe strongly that charging a flat fee is the future of this market and is the only feasible option for master brokers.”

Fairfax said that master brokers and packagers hoping to survive would have to deliver cleverer distribution and value.

He added: “Packagers will always have a place in the market but in future, they are not going to own 100% of distribution in second charge.

“In a year I think we’ll see the split look for like 80/20 and in five years I’d expect roughly half of seconds to go through brokers directly and half through packagers.

“There will always be a place in the market for packagers but I think they’ll need to offer brokers additional value – either through more competitive rates or through deals that aren’t available directly.”

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