Fluent for Advisers, the second charge specialist distributor, has stated that all the available evidence following the introduction of the Mortgage Credit Directive (MCD) suggests that regulation has been a “positive game changer” for the second charge sector.

Tim Wheeldon, Fluent’s COO, argues there has been no downside and while costs have risen, the overall effect has helped legitimise the sector far faster than any other factor.

He said: “The principal effect of regulation has been to ensure that customers know that they are actually getting advice and as a result the evidence we have seen at Fluent is that conversion rates are higher, which means more cases going to completion.

“Customers feel more secure within a regulated environment. It has also helped to focus the minds of intermediaries that there is no longer a credibility gap between first and second charge lending.

“Responsibility now sits squarely with the adviser (whether directly or by referral to a third party master broker) and the fact that second charge must be considered when raising capital, means that we are beginning to see an upswing in second charge business from advisers new to sector.

“There might be some moaning about the cost of regulation on providers, but frankly the extra cost when put against the gains in being able to reach a new audience for second charge loans, puts that into proper perspective. Changes to fee structures and extra compliance will challenge the profit models of some providers. However, good master brokers and distributors will already have factored in those costs and will have planned to streamline their services accordingly.

“If and when they write the history on the second charge market, regulation and the positive effect it had on establishing the sector as a mainstream borrowing option cannot be overstated enough.”