A host of master brokers, including Complete FS, have opted to axe master broking fees and move onto a flat application fee structure in the wake of the changes. At the time, Tony Salentino, Complete FS director, said high master broker fees are one of the main reasons advisers are reluctant to adopt second charge loans over the remortgage alternative.
The increase in standards ushered in by the MCD is likely to trickle down the charging models of master brokers, Ms Hoyle said.
The lack of knowledge among brokers is one of the more pertinent factors that threatens to hinder the growth of the second charge market, according to Mr Landy. He said some advisers have struggled to shrug off the “outdated view that second charge loans are a last resort product for individuals with bad credit who would be turned down for borrowing mainstream lenders and still command eye-watering rates of interest."
Interest rates on second charge mortgages are higher than traditional first charge loans because they pose a greater risk to lenders as the repayment can only be made after the main mortgage. However, rates have plummeted – with deals now starting at 3.83 per cent, Mr Landy said.
Ms Hoyle said: "We need to look at what can be done to better educate brokers on second charge mortgages as well as the wider public. The market has been under the radar for a long time, but second charge mortgages can be suitable solutions for many."
Under current rules, adviser firms are not required to broaden their services to include both first and second charge mortgages, but if a client with an existing mortgage seeks to borrow more, brokers are stipulated to inform the individual of other forms of borrowing that are available that may also meet their needs.
Mike Richard, director at London-based Mortgage Concepts Associates, said that the second charge market is an area in which mortgage advisers should be well versed, adding: “I do not think you can offer a full and complete mortgage advice process if you do not have the ability to advise on the second charge market.
"There are situations where the client is on an extremely competitive mortgage deal. Here, as not to lose the competitive rate of interest, taking out a second charge loan might offer a better blended solution than refinancing.”
On the future of the second charge market, Mr Moore said: "Second charge mortgage numbers will continue to grow over the years ahead, because quite simply, for some customers they are the most appropriate solution. The sector has its own trade body, the Association of Finance Brokers. Perhaps rather than reinventing something that already exists, second charge brokers should show their support by paying for membership of the AFB."
