FR: The second charge market appears to have been reborn in the last 12-18 month from the post-Credit Crunch lows. What do you put this down to?
Undoubtedly the sector has seen a significant increase in competition over that period – we now have far greater numbers of active lenders, all keen to write business and this perhaps inevitably resulted in lower rate products being developed. The downward pressure on rates has been a real quantum shift for the sector and we now reach a point where record numbers of customers are being offered low-rate, attractive deals. This, combined with less onerous packing requirements,is making second charge loans an attractive proposition for both customers and intermediaries.
FR: It appears to be an incredibly competitive marketplace for secured loan brokers like yourselves. How do you differentiate yourself?
We have a number of USPs which we believe differentiate us from our competitors and these have been developed over many years working within the sector. The Loans Engine is not a new player on the scene but a well-established business managed by senior financial services professionals, who have considerable experience at running FCA (formerly FSA) regulated businesses. Added to this are a number of core differentiators – firstly we are a financially stable business with substantial net assets; we have a very strong culture of regulatory compliance and best practice, driven by good old-fashioned customer service. We also offer a true TCF proposition through which the customer is always offered the best loan, consistently achieving the best outcome for the customer, whether that be secured or unsecured.
Additionally, we have a strong team of staff who are experienced, appropriately qualified, continuously developed and supported by our cutting-edge technology. We are a significant business with the necessary scale and resource to successfully service the needs of large partners and therefore also have the leverage to obtain the best products. All this ensures we lead the marketplace and are highly rated by both our customers and business partners.
FR: Technology and sourcing system developments has been a key part of 2015 for the second charge loan market – where do you think technological innovation goes next?
It’s certainly true that ‘sourcing systems’aimed at the second charge market seem to be sprouting up everywhere. Our recommendation for intermediaries is to proceed with caution because if they’re not taking into account the customers’ detailed credit profile, the lenders’ policy and their score rules, they may do more harm than good by mismanaging customer expectations.
Great technology can deliver a terrific customer experience and outcome if the customer knows from day one what ‘their’ deal really looks like. We know this better than most as we have been continuously developing our sourcing technology since 2003. But while technology gets the customer journey off to a great start, it can only go so far. Again, our advice is never lose sight of the value of good, strong relationships, experience and great service. All the technology in the world isn’t going to help you if it’s not underpinned by great people who are well trained.
FR: With the MCD on the horizon, how can mortgage advisers in particular make sure they comply with the new rules and they are securing access to a secured loan offering?
Post-MCD there is no requirement for mortgage advisers to offer second charge loans, but they do need to make their customers aware of them if the customer is looking to increase their borrowing. However,if they want to continue describing their proposition as whole of market, they will either need a reputable partner that can provide the second charge service, or do it themselves. This will be a major challenge and decision for firms, and is one they need to take seriously to ensure they carry out all the necessary due diligence.Choosing the right partner to work with will be critical in servicing the needs of the customer when the new regime kicks in.
FR: Do you think the industry will be prepared for the changes?
Yes, both lenders and brokers are actively working together to ensure a smooth transition. We would like to adopt the changes earlier, but it’s likely that most lenders and brokers will adopt the new regime on the 1st February, and this should allow sufficient time to complete the CCA pipeline, before the 20th March deadline. It’s inevitable that the odd deal may have to be resold, but MCD transition will only be judged a success if we can minimise customer inconvenience and communicate positively with those affected.
FR: What are your plans for the business over the next 12 months?
Obviously our priority is to be ready for the new regulation and to future-proof the business for those changes and how they might practically play out. We are in a great place and are excited about the changes and what it will do for the second charge market. It’s been some time coming, but second charges are now genuinely seen as a mainstream alternative for a remortgage and this is a culture change for the marketplace.
As we move into 2016 our primary goal is to continue to grow from our market-leading position. What singles us out from the crowd is that we’ve been broking second charge loans for almost 30 years, through two recessions, and we write one in 10 of all second charge loans in the UK. As we strive for an even larger share of the market, we also see a great opportunity to grow the market through communication and education as well. I am confident that The Loans Engine can lead in the creation of market growth, which will naturally increase our market share and exceed our position of one in 10.
Whilst recently visiting the FSE exhibition, I heard a speaker from the FCA comment on the up-coming MCD implementation: “Smart firms will see a business opportunity here, one which provides a holistic proposition of services – smart businesses will gain from this approach.” I, for one, have never felt more excited to be in this industry.
