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much broader than focusing on one type of retail lending activity or a narrow group of retail lending activities. So, we have clarified the breadth of our work by removing the explicit reference. We confirm that this business plan commitment will continue and that our work will encompass a range of retail lending activities.” Sinclair believes the seconds market is still on the FCA’s agenda but perhaps not a priority at the moment. “I think at some stage it will come back and look at the market, especially if it sees a significant uplift in volume as it might question why that is happening,” he says. The return of 100% LTV lending One of the big headlines of 2019 for the second charge market was the launch of Optimum Credit’s 100% LTV product. The launch proved to be a marmite moment for the industry. “Optimum’s 100% LTV product was a headline moment but met with very different opinions,” says Darren Perry, head of second charge lending at Brightstar. “Some people thought 100% LTV was a risky move but the flip side of that is the confidence it showed that second charge lenders have in the market and their willingness to support it,” he says. Craig Collins, wholesale director at Optimum Credit says he was far from disappointed that the news attracted headlines. “Our 100% LTV product is a major innovation and a big shot in the arm for the market,” Collins says. “It gives brokers the opportunity to offer a solution to a previously excluded set of customers, so we would have been disappointed if it had not attracted headlines.” Paul Huxter, head of sales at Enterprise Finance, believes the launch of the 100% LTV deal and other similar products throughout the year was in response to what was happening in the first charge market. www.mortgageintroducer.com
“The second charge mortgage market has responded to the return of 100% lending in the first charge market by creating more flexible products,” he says. “This is important because keeping aligned with the high street will ensure that intermediaries can assist all clients to access suitable finance options, particularly those not able to achieve the lending requirements of traditional outlets.”
How low can you go?
Also mirroring the first charge market was the rate war the market experienced over the past 12 months. As the temperatures heated up outside during July, so did the rate war, with Paragon Bank launching a second charge variable interest rate at just 3.47%, together with 2-year fixed rate loans from 3.64%, 3-year
“Recent figures show that the number of new second charge agreements reached 27,092 in the twelve months to September 2019 - a decade high and up 20% compared to the previous year” fixed rates from 3.75% and fiveyear fixed rates from 3.98%, all up to 85% LTV. The lender also offered a set of products which came with no Early Redemption Charge (ERC). “Paragon’s rates were market leading when they were launched,” says Perry, “but you also have Optimum with its rate for risk model, which has on numerous occasions been able to undercut the cheapest advertised rate of Paragon,” he adds. The lowering rates helped widen the appeal of seconds to a broader market. “For an increasing number of homeowners this means second charges can be a cost-effective DECEMBER 2019
way of borrowing,” says Grundy. “Increased competition in the market has improved the pricing for consumers and this has helped to attract higher quality borrowers to the sector, too,” she states.
Speed and technology
Rates were not the only thing that decreased in 2019; so did the length of time it took to complete a second charge. Together announced in July that it had provided a second charge loan in just four days, while the beginning of the year saw Freedom Finance roll out its Open Banking Solution to second charge lenders, also designed to cut down completion times. United Trust Bank’s electronic ‘facial recognition’ ID verification app was without a doubt one of the technological highlights of 2019 for the second charge market.
How low can you go?
Anna Bennett, marketing director at Positive Lending, says the market has seen some fantastic lender innovation this year. “Some lenders have started to roll-out exciting fintech solutions, streamlining their processes and enhancing the customer journey,” she says “A good example of this is UTB’s facial recognition ID verification, which was launched in the summer, and through a smartphone app takes just 90 seconds complete an ID check.”
No news is good news
Looking back on 2019, it’s safe to say there was little in the way of ‘breaking the internet’ from the news generated. Yet this will no doubt be a welcome relief to a market which has suffered more than its fair share of negativity over the years. The lack of headlines and specifically the lack of negative headlines perhaps signals that the sector is on a steady footing and can hopefully enjoy some quieter, albeit prosperous and progressive times ahead. MORTGAGE INTRODUCER
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