City watchdog tightens criteria for second loans

October 10, 2014 by Brendan O'Neill

Lenders

Whilst they are currently viewed and assessed as consumer credit, the Financial Conduct Authority has stated that it plans to regulate ‘second charge’ mortgages from March 2016.

April saw the Mortgage https://www.beaconfinancialtraining.co.uk/wp-content/uploads/2020/06/cemap-online-and-classroom-training-uk.jpget Review take place, and as a result the Financial Conduct Authority implemented stringent policies and criteria for residential lending.

As with standard homeowner mortgages, the ability of the borrower to repay will be assessed to ensure that the repayments can be made – both at the time of lending and also factoring in future rate increases. Findings showed that generally, second charge mortgages had higher arrears levels and the Financial Conduct Authority was quoted as saying:

“We recognise that second charge mortgages are beneficial for some customers but we are concerned that consumers can be put at risk by poor sales practices and ineffective affordability assessments.

“Given the risk of consumer detriment, we want to embed good practice and we believe that applying our mortgage rules is the best way to do this.”

Whilst some people are not fans of second mortgages due to the higher rates that are often applied, others welcomed the watchdog’s move. Some feel that when people look to obtain a second loan on their property, their debts can become harder to manage and consolidate.

Professionals who have undertaken and completed the appropriate CeMAP training are qualified to provide an open and transparent service, during which they assess their clients’ individual needs and recommend the most suitable mortgage solution for their circumstances.