The Intermediary – January 2026 - Flipbook - Page 61
S E C O N D C H A RG E
Opinion
Experience,
evolution and
responsibility
F
ew areas of lending
have evolved quite as
significantly, or been
quite as misunderstood,
as second charge loans.
Having worked in
the second charge market for almost
43 years, I’ve seen it move from an
industry best described as the Wild
West, with far too many cowboys, to
a regulated mainstream product that
all mortgage brokers should have in
their locker.
When I first started working in
this market, it was dominated by
fewer than 100 brokers nationwide.
Both national and local newspapers
carried multiple advertisements with
headings such as “Fast Loans”, usually
including both interest rates and the
equivalent weekly repayments.
In 1985, a change to the Consumer
Credit Act introduced a 17-day
cooling-off period for loans to reduce
high-pressure sales tactics. However,
this did nothing to reduce the size of
the market, with the biggest brokers
completing over 250 loans a day
in 1987/88.
When the very dodgy brokers and
lenders bent the rules, the Office
of Fair Trading would react like
a sedated tortoise. Second charge
lenders eventually decided that selfregulation was the only way forward
and established the Finance Industry
Standards Association (FISA), run
by an ex-broker with former police
detectives as his deputies. FISA did
a good job of eliminating many
of the remaining cowboys, oen
by carrying out what can only be
described as a police raid, but it was
closed in 2009 when its funding from
lenders dried up.
One excellent outcome for clients
was the FISA booklet, issued to
all borrowers with the initial loan
documentation, explaining every
aspect of the borrowing commitment.
It is something the Finance & Leasing
Association (FLA) should revisit, as
it was of great benefit to customers,
particularly as it was wrien in plain
English rather than by someone who
had swallowed a thesaurus.
The market suffered from Rule of 78
selement penalties (Google it if you
don’t know) and lump-sum payment
protection insurance sold to people
who did not need it, but it had cleaned
up its act well before second charges
fell under FCA control in 2016.
In the lead-up to 2008, second
charge loans were everywhere: The
internet, the most prominent page in
every Yellow Pages, sponsored shirts
at Premier League clubs, and adverts
in every break on every TV channel.
One broker even had their own Sky
channel. I once stopped at the services
on the M6 and found myself staring
at a second charge advert above the
urinal. Public awareness was at its
maximum. So, where are we now?
The second charge market is growing,
with the FLA reporting £2.045bn
for the 12 months to October 2025.
However, this is still only around a
third of its size prior to the 2008 crash.
Cooling-off periods and single
premium PPI are distant memories,
and Rule of 78 is remembered only
by those of us old enough to have
lived through it. I haven’t seen a press
advertisement in over 20 years, and
most brokers looking to arrange
volume in the second charge market
are chasing the same networks and
directly authorised (DA) brokers as
their competitors. This approach does
not expand the market for what is now
a mainstream product.
Very few firms are trying to aract
customers directly, and even fewer are
doing so legally. If you have Facebook
TONY SUTTON
is managing director
at Specialist Hub
look at some of the second charge
adverts and you’ll quickly realise that
many of those brokers haven’t read the
rules on financial promotions.
The market is ripe for expansion
– but it must be done properly. The
treatment of vulnerable customers
has improved massively, although
there is still room for improvement.
Technology is now used extensively,
with new enquiries submied
electronically and approved
within seconds.
The rise of dynamic pricing has
been a major benefit, with interest
rates determined by a range of behindthe-scenes factors. As a result, we are
oen seeing rates significantly lower
than those offered by lenders with
published pricing. In most cases, we
no longer require a physical valuation
as automated valuation models
(AVMs) have removed the need for
expensive surveyor visits.
There is also no need for solicitors
to be involved, asking da questions
and delaying maers. Second charge
lenders have always had in-house
legal procedures, enabling them to
complete loans on the day signed
agreements are received.
The responsibility for all brokers
offering second charges is simple:
do it properly. Be fully compliant
when generating enquiries, ensure
borrowers understand the bad as well
as the good, treat them fairly, and
comply with the rules – especially
Consumer Duty.
If you don’t, you could be the reason
for the FCA’s next issue with second
charges – and the FCA is not a sedated
tortoise. ●
January 2026 | The Intermediary
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