71% of broker respondents to a recent webinar poll who haven’t recommended a second charge mortgage before said they will look to do so this year.
In addition, the poll, conducted by Central Trust, found that a majority of brokers raised issues with placing cases with self-employed and contractor clients due Covid-19 related income issues.
61% of respondents said they were having problems placing such cases due to reduced income during the pandemic, despite client incomes having recovered to pre-pandemic levels.
These responses emerged during a Lender Spotlight session – held in conjunction with Knowledge Bank – based on the specialist lending marketplace which had over 100 brokers in virtual attendance.
Maeve Ward (pictured), director of commercial operations at Central Trust, said: “These findings highlight the fact there is still a real need for education in the marketplace about second charge mortgages and how and when they can be an alternative to a re-mortgage and a good customer outcome in certain circumstances. I’m confident that when brokers fully understand how and when a second charge mortgage might be the right outcome they will look to offer them either directly or via a master broker.
“Many self-employed borrowers will be looking to capital raise and a second charge may well be the best solution. However, most lenders operating in the market will fall short of the self-employed borrower’s requirements because they will assess the income from the most recent SA302 – which will relate to the period of the pandemic – and not take into consideration what went on before or how the business might now be operating at pre-pandemic levels.
“At Central Trust, however, we like to take a more reasoned approach to our applications, looking a person’s circumstances and income history. In the case of the self-employed for example, we will lend on the 2019/2020 SA302, subject to three most recent bank statements and a projection from an accountant which supports that the income has returned and the business is stable. This means the self-employed applicant will be assessed using a more common-sense approach and may well be able to achieve their borrowing requirements.
“Brokers should take the time to become knowledgeable about the second charge market. That way, they will be both following the spirit of the Mortgage Credit Directive (MCD) and be much more likely to help their clients find the best solution for their circumstances.”
