Smart Money believes that the landscape for second charge lending is already changing radically in advance of full integration into the main regulatory framework in April 2016.

Its managing director, Paul Crewe, said: “We are already seeing the changes taking place in the makeup of our introducer firms. Pure finance brokers are recognising that they must incorporate first charge mortgage advice or they face an uncertain future.

“By the same token, mortgage specialists are having to weigh the advantages of maintaining a true ‘whole of market’ offering by applying for permissions to offer a second charge alternative to a remortgage.”

According to research on Smart Money’s new business over the past 12 months, Crewe is seeing plenty of new business from mortgage brokers, who had not previously done a second charge case for which he believes there are a number of reasons.

He added: “We are no doubt gaining business because of the issues being caused by many high street lenders’ interpretation of the affordability rules under the MMR. Second charge lending is no less rigorous in its underwriting but does display a more empathetic approach to individual circumstances, which is making it particularly popular with clients. Also rates are at their cheapest with some under 5%, which makes second charge borrowing more affordable.

“But let us not forget that many borrowers would be less well off if they remortgaged, that is if they can actually get a mortgage. If a client’s credit rating has suffered during the recession, a remortgage could be a lot more expensive than leaving the first charge in place and using a second charge loan for the extra funding required.

“We have yet to see how many brokers want to pay the price of admission to get their permissions to offer second charge advice. With a cost of up to £15,000 depending on turnover, the question we need to ask is how many will want to pay or just hand off and refer clients to specialists for the right second charge advice.”