The Intermediary – November 2025 - Flipbook - Page 92
S E C O N D C H A RG E
Opinion
Helping or
hindering?
W
hile the
evidence tells
us that debt
consolidation
is the major
purpose for
second charge mortgages, there is still
a reluctance among intermediaries
to recommend a second charge
solution. This is partly caused by a
historic unwillingness to consider a
method that had given rise to negative
baggage in the past, and also because
of the potential future compliance
concerns associated with dealing with
customers who present the need to
deal with multiple debts caused by
credit cards, store cards and maxed out
credit deals.
Of course, as can be seen by the
regulator’s stance on Consumer Duty,
the onus is firmly on advisers to keep
in mind the outcomes generated by
advice. So, it is important that – when
dealing with clients who seek advice
on the best ways to deal with credit
arrangements that are not under
control – advisers remember that
consolidation either via remortgage
or second charge is only one way
of helping clients with a debt
predicament. The alternative path is
to recommend debt counselling and
helping clients make arrangements
with creditors.
One thing is for sure: we don’t want
to be piling fuel on the fire by chasing
new business down the credit curve in
an aempt to build volume at the cost
of compliance credibility.
Of course, every client lead is an
opportunity, and as advisers we have
access to powerful tools to help make
a difference to peoples’ lives. There is
nothing wrong with helping people
reduce their monthly outgoings
through consolidation, and choosing
a second charge solution can make
a great difference to clients who are
struggling to manage existing debt
repayments.
Borrowers’ responsibilities
It could be argued that perhaps we
should be asking ourselves whether we
should be controlling people’s access
to funding for consolidation to ‘save
them from themselves’.
There is an argument that people
in need of more finance to pay off
expensive borrowing, should be
policed in some way. However,
voluntary debt counselling is there
for anyone who wants it, and what’s
wrong with a lending solution that
reduces monthly outgoings on debt
servicing through consolidation?
Financial advisers are in a unique
situation to judge which path a
customer should take – but the final
In the right circumstances, second charge can offer a helping hand
86
The Intermediary | November 2025
LAURA THOMAS
is regional sales manager
at Equifinance
choice has to be le to them. If they
feel that consolidation will reduce
their repayment burden to a point that
gives them a real chance to put their
finances back on an even keel, and
the savings made demonstrably leave
them in a beer position, then, as
someone working for a second charge
lender, I am totally in favour.
When a consolidation enquiry
comes to us, affordability is a key
determinant, along with looking
at the credit history for clues
demonstrating how applicants have
handled their past financial affairs.
However, what we can’t see is how well
customers will resist the desire to take
on more credit once the new mortgage
or loan has been granted.
We all agree on the need for
customer protection in financial
services, and especially lending.
What we, as an industry, must not
allow, is to be expected to take over
all the responsibility for a customer’s
decision. If in the future things go
wrong, is it the fault of the industry?
Of course, brokers and lenders
must ensure that all the checks and
balances are met, but ultimately
the final responsibility for taking
on, in this case, a new loan, is the
customer’s to make.
While brokers need to weigh
up each client’s needs and their
capacity to manage a new financial
arrangement via consolidation,
ultimately they cannot be held
responsible if, aer arranging a
consolidation loan, the customer
decides to max out their credit
cards again.
In a free society, people have the
right to avail themselves of any service
they choose, but those rights come
with responsibilities. ●
