Residential second charge
Good Practice Guide
02 December 2019
02 December 2019
Society of Mortgage Professionals, West One
Insight on when it would be appropriate to consider a second charge for clients looking to raise capital.
The second charge market has been going through a period of evolution in recent years. Historically second charges fell within the scope of the Consumer Credit Act 1974 which meant that for mortgage intermediaries there was a disconnect in terms of the permissions required to arrange a second charge mortgage over a first charge.
It also meant more significantly that there was no requirement to provide advice in connection with a second charge and consumers were not protected in the same way as they would have been had they taken out a mortgage.
However, all this was to change following the introduction of the Mortgage Credit Directive in 2016 which also coincided with the transference of second charges into the mortgage regime. For the first time the regulatory standards and rules for first and second charges became aligned, meaning that there was a requirement placed upon firms to provide advice in connection with a second charge mortgage.
As a result consumers were offered greater protections under the new regulatory regime and the professionalisation of the sector began in earnest.
This Good Practice Guide, written in association with West One, is designed to provide a valuable insight for mortgage professionals as to when it would be appropriate to consider a second charge for client looking to raise capital. It examines the following:
- background to second residential second charges
- market overview
- how the changing mortgage market will support the growth of second charge lending
- when are second charges a good option?
- legal representation
This document is believed to be accurate but is not intended as a basis of knowledge upon which advice can be given. Neither the author (personal or corporate), the CII group, local institute or Society, or any of the officers or employees of those organisations accept any responsibility for any loss occasioned to any person acting or refraining from action as a result of the data or opinions included in this material. Opinions expressed are those of the author or authors and not necessarily those of the CII group, local institutes, or Societies.