You may be able to cast your mind back but I would be surprised if you could remember exactly what you were doing on 21 March 2016.

This date, however, was memorable for the entire mortgage market — and particularly for advisers, because it saw the introduction of the Mortgage Credit Directive (MCD) into UK financial services regulation, which essentially levelled the playing field between first and second charge mortgages.

It may seem odd that I’m referencing a directive that has been part of our environment for more than five years and that you might assume had been completely subsumed into ‘business as normal’ by advisers. But the latter may not necessarily be so.

As a community, we’ve had plenty of time to put this into practice

For instance, among a number of other changes the MCD initiated the new adviser regulatory responsibility that every potential remortgage or further advance client should be made aware that a second charge mortgage could be a viable alternative. A simple enough process, you may assume, and one that, if you think about it, should mean that a significant number of borrowers were being advised on and recommended seconds as an alternative to what might be deemed the more ‘traditional’ product recommendation route.

However, more than five years on — and as a specialist master broker in the seconds market — we can say with confidence that a minority of advisers are still not doing this. You may suppose that every adviser will have placed at least one second charge mortgage customer during that time. But we deal with a small number of advisers who, when you ask how many second charges they have done, still say, ‘Never done one.’

Of course, they may be able to provide the regulator with evidence to back up a remortgage or further advance recommendation. But can they truly say that no client during that time merited a second charge?

Missing out?

If so, this may lead us, and the regulator, to question whether this adviser’s client cohort is missing out on access to what may be a more suitable, alternative product that better meets their needs and requirements. Not forgetting the additional revenue that might be available for their business if the adviser were actively putting the second charge option in front of clients.

The first step is making customers aware that their options extend to seconds

At the moment, homeowners would be hard pressed not to be aware of the ultra-competitive first charge remortgage market. They may be looking at very low rates coming to market and, coupled with their need to access equity in their homes, could be thinking this was a market ripe for the picking.

However, as advisers you’ll be acutely aware that the ‘headline rates’ on offer are out of reach for a significant number of homeowners, for any of several reasons: the income/affordability doesn’t fit, they’re out of the loan-to-value band, they have a number of years left on their current deal with sizeable charges attached… the list goes on.

The MCD essentially levelled the playing field between first and second charge mortgages

And yet that loan requirement remains. And this is exactly the sort of situation that the MCD was brought in to deal with. For the customers listed above, are they being offered the second charge alternative? Or are advisers simply attempting to get a remortgage or further advance deal through that ultimately could be more costly?

We should not forget that second charges can be used to fund any legal purpose — tax bills, school fees, debt consolidation, home improvements, to provide a deposit for a buy-to-let property, etcetera. The only exception is to pay gambling debts.

Pink Pig recently dealt with an application for a client wanting to raise £250,000 for a combination of home improvements (£195,000) and debt consolidation (£55,000). Their existing mortgage was with Barclays, which wouldn’t grant a further advance because of income multiple issues; plus a remortgage would have come with an early repayment charge (ERC) of £36,000 as the client had a fixed rate until 2024.

We deal with a small number of advisers who, when you ask how many second charges they have done, still say, ‘Never done one’

We were able to proceed on six times joint income — standard in the second charge sector — to secure the product they needed. They were able to use the money as required while both keeping their first charge rate and avoiding the ERC.

Undoubtedly, many more clients have these circumstances and requirements. But the first step is making customers aware that their options extend to seconds and that ultimately it could be the far quicker, more cost-effective mortgage available to get the money they need.

As a community, we’ve had plenty of time to put this into practice and, for those that aren’t, the time to change is now.

James Rainbird is managing director of Pink Pig Loans