Second charge will turn a corner in 2017
Specialist broker Enterprise Finance is optimistic the second charge market will improve in 2017 after going through what it deemed a transitional year.
Second charge lending rose by just 4% year-on-year to December 2016, something Enterprise blamed on the Mortgage Credit Directive and the vote to leave the European Union.
Harry Landy, sales director of Enterprise, said: “Overall, 2016 has been a transition year for the second charge sector.
“However, the market has shown its resilience, and we believe there is cause for optimism in 2017.
“Firstly, the quality of second charge mortgages being issued now is much improved – something reflected in the fact that repossessions are down considerably compared to 2015 – and as more brokers begin to consider second charge for their clients, we expect that we will see growth pick up again.”
Under MCD regulations brokers need to consider both first and second charge mortgages – and Enterprise warned that brokers who don’t are flouting the rules.
In the run-up to the MCD implementation in March the second charge market lent a record £86m in March.
However after seconds became regulated there was a 41% reduction to £51m in April.
The year-on-year growth rate would slowly fall from 24% in June to 4% in December.
Landy added: “The market is in a good place for the coming year, but the truth is that more brokers need to be aware of the benefits of second charge mortgages, as they are now a mainstream alternative to a remortgage or further advance.
“They need to understand the role second charge mortgages can play for their clients. Doing so will make sure they participate in the market and can unlock growth.
“We will certainly be continuing our programme of broker education to deliver that outcome.”