Diversify or die: embracing the second charge market

The study found 79% of people in the UK don’t know what a second charge mortgage is and of those who had heard of second charges 23% didn’t know how they differed from remortgages.

Unfortunately, whilst this may have been unpleasant to read it wasn’t exactly unsurprising. How can we expect borrowers to know what seconds are if we’re not promoting them?

In the past you could scarcely open a newspaper or watch daytime TV without being informed of second charges. Advertising budgets for the likes of Firstplus were large and the industry was keen to shout about the products.

Since marketing budgets were slashed however it’s all gone a bit quiet on the advertising front. And if consumers aren’t hearing about seconds directly through advertising there’s really only one place they will hear about it - through mortgage brokers.

Indeed, in terms of units sold, secured lending figures are falling at present - a clear sign that the mortgage intermediary community has not embraced it. Despite this, consumers are accidentally falling in to second charge loans in droves when they apply on comparison sites, often initially wanting an unsecured product.

Are you starting to detect the problem here? As has been said on many occasion by many a commentator, mortgage brokers still aren’t engaging with second charge mortgages in the way that they should.

There has been plenty of talk about the benefits of seconds to consumers. Some, perhaps on a low rate tracker mortgage, will find a secured loan is simply a cheaper option. Others with circumstances which are not exactly mainstream or ‘vanilla’ may have limited other options. There are huge benefits for them in using second charge as a form of finance and by ignoring such products brokers clients will miss out.

But it’s not just clients who will suffer if brokers don’t embrace the seconds market. It’s clear from studies like Together’s that a focus is being put on consumer education. Lenders want potential borrowers to know about these products and it’s likely to be a major focus this year.

And once consumers become more aware of these products they will no doubt align themselves with a firm which they know can deliver the goods. It’s widely agreed that most second charge enquiries could also be considered for a remortgage so if you are not telling your clients about seconds now, don’t be surprised if they ultimately apply to someone who is, and that person ends up offering a remortgage.

As the saying goes, diversify or die.