Darren Perry, national account manager, Brightstar Financial

Most people have probably seen our recent research in which three-quarters of brokers admitted they did not talk about second charge mortgages to their clients.

This is a significant majority and it should be a concern to the regulator. Cast your mind back to 2016 when, as part of the Mortgage Credit Directive, second charge lending moved from being governed under Consumer Credit legislation to come into the remit of the FCA and its Mortgage Conduct of Business rules. This means that second charge lending sits under the same regulatory umbrella as first charge mortgage lending and should be considered alongside first charge options for customers who want to raise capital.

If three-quarters of brokers say they don’t talk about second charge mortgages with their clients, it seems unlikely that they have considered their options here, meaning some customers will be missing out on potentially the most suitable capital-raising option for them.

For example, there are many borrowers on a lifetime tracker or variable rate that is so low that they would be unable to match their current rate by remortgaging. For clients in this situation who want to raise extra money from their property, it can sometimes be more cost-effective to use a second charge mortgage to borrow the money rather than shift the entire balance onto a more expensive rate.

Second charge lending has always been a popular choice for people carrying out home improvements and, in many instances, where these are likely to result in a significant increase in the house price, it can be beneficial to take a second charge mortgage to pay for the works. This opens up the opportunity to remortgage at the higher property value and lower LTV, and combine the first and second charges – something that might prove particularly effective in the current environment where there is a squeeze on higher-LTV first charge lending.

More brokers should be considering second charge mortgages – every broker should. This is an area that the FCA should monitor, but it is also an area of opportunity for brokers rather than one they should fear.

John Phillips, national operations director, Just Mortgages and Spicerhaart

I don’t see why the FCA should favour one part of the mortgage market over another. Its role is to ensure that all parts of the market are subject to appropriate regulations so brokers can make the best decisions for their client.

Under normal circumstances, second charge mortgages should rarely be needed. There are occasions when clients need quick decisions where a second charge may be the only option, and if they have large early repayment charges it can be a more cost-effective choice. But most of the time a remortgage or further advance is likely to be the better option.

One of the reasons some are having to turn to second charge mortgages currently is lenders’ tighter criteria – clients being recommended second charge mortgages because they don’t have the same checks in place that a first charge mortgage has. This may not be in the client’s best interests in the long term.

For those who can only just afford their existing mortgage, adding another on top increases the risk that they could lose their house if they subsequently can’t pay either of the loans.

For those looking to consolidate credit card debt or other unsecured loans, second charge products may look like a sensible option in the short term but the customer could end up paying a lot more interest overall.

If the FCA really wants to ensure brokers consider second charges, it could tighten up the regulations to bring them in line with other mortgage advice. Affordability checks are currently only ‘expected’ of second charge lenders and are not a requirement. Applying the same stringent checks would ensure transparency. These checks could also result in lower rates and product fees, and could mean brokers would feel more comfortable recommending them. The downside is that it would slow the process down.

The FCA could tighten regulation to reduce the risk involved. However, for us the crucial aspect is the need for first charge lenders to loosen criteria to open more of the market to clients. This would dramatically reduce the need for second charge mortgages and benefit the client, which is what every broker should be focused on.